‘this is the worst-case scenario’

Snap Inc (NYSE: SNAP) shares tanked more than 25% in extended trading after the social media company reported disappointing results for its fiscal second quarter on advertising slowdown.

Snap Q2 results: a quick review

• Lost $422.1 million – about a 2.8 times increase on a year-over-year basis
• Per-share loss of 26 cents was significantly worse than last year’s 10 cents
• On an adjusted basis, lost 2 cents a share versus the consensus of 1 cent
• Sales jumped 13% to $1.11 billion, below Street estimates of $1.14 billion
• Daily active users up 18% YoY topped expectations by nearly 3.0 million

The earnings press release also disclosed plans of a “substantial” slowdown in hiring and operating expense. The $27 billion company had trimmed its outlook for the current quarter in May, but failed to meet even that on Thursday.

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Heitzmann reacts to the earnings report on CNBC

Snap refrained from offering future guidance, saying the operating environment remains “uncertain”.

Other than the hit to digital ad-spend, Apple’s privacy changes, increased competition and a more challenging economy at large are among the headwinds currently in its face.  

Still, Snap authorised up to $500 million in stock repurchase. Reacting to the earnings report on CNBC’s “Closing Bell: Overtime”, Rick Heitzmann – Founder of FirstMark Capital said:

This is the worst-case scenario. It’s a combination of operating as well as macro problems. [What’s] also incredibly negative is suspending guidance. It’s clear that the economy in their business is unprojectable at this point.

The stock price is now down more than 70% year-to-date. Heading into the earnings report, Wall Street had an “overweight” rating on Snap with upside to $23 a share on average.