Snap Tumbles on Negative Outlook Surprise

Snap Inc (SNAP:US) shares fell more than 19% on Wednesday after the social media company forecast a much larger-than-expected adjusted Ebitda loss for its third quarter.

While Snap sees Q3 revenue at $1.10 billion, below the market consensus of $1.13 billion, it is the adjusted Ebitda guidance that fueled a sharp move lower in after-market trading hours. Snap said it sees an adjusted Ebitda loss between $50 million to $100 million, while analysts were looking for a loss of just $2.14 million.

Snap’s profitability and margins are expected to take a significant hit as the company continues “to invest in ML, AI, and other infrastructure to improve the performance of our ad platform, drive deeper content engagement, and bring innovative product experiences to our community.”

Daily active users (DAUs) are seen in the range of 405 million to 406 million, below the 406.3 million expected by analysts. For the second quarter, the company said DAUs rose 14% year-over-year to 397 million, ahead of the Street at 395.2 million.

Revenue fell 3.9% to $1.07 billion while Snap reported an adjusted loss per share of $0.02, better than the expected loss per share of $0.04. 

"From a revenue perspective, our business remains in a period of rapid transition as we work to improve our advertising platform, while forward visibility of advertising demand remains limited," the company said in a press release.

Lawmakers Ro Khanna, John Hickenlooper, and Josh Gottheimer were trading SNAP shares this year. Rep. Kathy Manning reported a $15,000 - $50,000 sale of SNAP stock on June 10 last year, when shares were still trading above $13 apiece.

SNAP stock traded around $10.30 on Wednesday.