These 2 Social Stocks Are Falling Hard Wednesday
It’s another important day for the stock market, as the Federal Reserve is scheduled to end its two-day meeting by making its latest pronouncement on interest rates. Stock index futures were slightly lower on Wednesday morning, with the: S&P 500: (^GSPC: 1.46%) seeing about a quarter-percent decline an hour before the start of the regular trading day.
Earnings season is hitting its peak this week, with a huge number of companies releasing their latest financial results. Several social media stocks are among them, and investors aren’t too happy with what they heard late Tuesday afternoon from Snapchat parent Snap: (SNAP: 4.24%). Another stock with a social angle that’s struggling is: Match Group: (MTCH: 3.28%). Below, you’ll learn more about why these companies haven’t been able to deliver what investors want to see.
Snap heads lower
Shares of Snap fell 14% in premarket trading on Wednesday morning. Investors reacted poorly to the fourth-quarter and full-year results that the social media company released late Tuesday, and Snap itself suggested that there could be more challenges to overcome in the near term.
Snap’s financial results were mixed. Revenue of $1.3 billion for the fourth quarter was almost unchanged from the year-ago period, but Snap lost $288 million, reversing a modest prior-year profit. Free cash flow dropped by more than half.
Snap did see some encouraging signs in its core business. Daily active users climbed by 56 million to 375 million, with gains across its geographical segments. The Snapchat+ subscription service now boasts more than 2 million paying subscribers, and efforts to integrate commercial applications have made substantial progress. Snap also sees augmented reality as being a key driver of future growth, and the company cited more than 3 million of its AR Lenses from over 300,000 creators and developers on the platform.
Yet Snap did not make investors happy when it chose not to provide any guidance for the first quarter of 2023, throwing cold water on the idea that a recovery will come quickly. With major competition coming from the likes of TikTok and the Instagram service from: Meta Platforms:Snap has to work harder to keep its niche in social media.
Not making a Match
Shares of Match Group also dropped, falling 8% in premarket trading. The online dating service provider dealt with weakness across its business, taking the wind out of the sails of what long-term investors have counted on being a high-growth company.
Match Group’s fourth-quarter financial results told the story. Revenue was down 2% year over year to $786 million, with adverse foreign exchange movements keeping Match from posting a profit. Adjusted operating income also inched lower, as the number of paying customers fell 1% to 16.1 million. Although the company’s Tinder app performed relatively well, Match’s “all other brands” category was generally weak, with a noticeable drop in paying customers. Match was able to post a profit of $0.30 per share for the period, reversing a year-earlier loss.
In addition, Match sees difficulties at least in the short term. First-quarter revenue should come in between $790 million and $800 million, which would be roughly flat year over year. Yet after a weak first half, Match is optimistic that it can generate 5% to 10% sales growth for the full 2023 year.
Many investors had hoped that Match Group would give a much more upbeat look at how it’s faring and spur a long-awaited bounce for the stock. Yet a tough ad market is affecting Match and Snap alike, and that trend could affect other social media stocks as well.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Match Group and Meta Platforms. The Motley Fool has a disclosure policy.