Stock Story -
What Happened: Shares of social network Snapchat (NYSE: SNAP) fell 24.7% in the morning session after the company reported second-quarter earnings results. Its revenue unfortunately missed analysts' expectations, and its revenue guidance for the next quarter came in slightly below Wall Street's estimates. Adding to the negativity was the fact that adjusted EBITDA guidance for the next quarter was significantly below. Overall, this quarter could have been better.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Snap? Find out by reading the original article on StockStory, it's free.
What is the market telling us: Snap (NYSE:SNAP)'s shares are very volatile and over the last year have had 15 moves greater than 5%. But moves this big are very rare even for Snap and that is indicating to us that this news had a significant impact on the market's perception of the business.
The previous big move we wrote about was 9 days ago, when the stock dropped 5.3% as the major indices declined, with the Nasdaq down 3%, while the S&P 500 fell by 1.7% following weaker-than-expected earnings from Alphabet (NASDAQ:GOOGL) (YouTube Advertising revenue missed estimates) and Tesla (NASDAQ:TSLA) (7% drop in auto revenue). Tech giants, including Microsoft (NASDAQ:MSFT), Alphabet, Meta (NASDAQ:META), and Apple (NASDAQ:AAPL), have shed some of their year-to-date gains as a new market narrative—in favor of small-caps stocks—gained some momentum following the growing conviction that the Fed will start to cut rates in the second half of the year. The sentiment also benefitted from improved inflation prints, as the headline numbers edged closer to the Fed's 2% target. Overall, the shift suggests investors are finding more reasons to hold positions in risk assets, especially small caps that tend to be more volatile.
Snap is down 40.9% since the beginning of the year, and at $9.54 per share it is trading 45.4% below its 52-week high of $17.45 from February 2024. Investors who bought $1,000 worth of Snap's shares 5 years ago would now be looking at an investment worth $560.57.
