Shares of Snap Inc. were outperforming the market on Wednesday, recouping some of the losses that followed the company’s recent profit warning.
Snap shares SNAP,
rose 7.4% to $12.79 on Wednesday, outpacing gains in the broader tech sector. The Nasdaq Composite COMP,
was up 1.8%, while the S&P 500 rose 1.0%. The social-media company closed at $11.91 on Tuesday, 85.7% off the company’s 52-week high, according to FactSet data.
Last month Snapchat parent Snap warned that second-quarter revenue and earnings will likely come in below prior estimates, citing a deteriorating economy. The news sent shares of Snap and other tech companies dependent on advertising, such as Alphabet Inc. GOOG,
and Meta Platforms Inc. META,
However, an ad industry expert recently told MarketWatch that Snap’s profit warning should be viewed within context. After rapid growth during the pandemic, Snap’s projections had been unrealistic, according to Brian Wieser, global president of business intelligence at media agency GroupM.
Snap’s ongoing ability to harness key Internet-related trends has also been highlighted as a positive. In a new report entitled “Crypto/Web3: The Next Iteration of Money and the Internet” KeyBanc Capital Markets analyst Justin Patterson notes that Snap, like Google and Facebook, has a large user base and significant resources to invest in Augmented Reality and Virtual Reality experiences. Snap can also provide developers with tools to engage consumers in unique ways, he added.
Snap, which describes itself as a camera company, had 332 million daily active users as of the quarter ending March 31, 2022, an increase of 18% on the prior year’s quarter.
See now: Profit warnings kicked into high gear, and there’s still no slowdown in sight
Of 38 analysts surveyed by FactSet, 27 have a buy rating on Snap and 10 have a hold rating.