Snap, Inc. SNAP, the parent company of Snapchat, faced a steep drop in premarket trading on Wednesday, causing concern among investors due to lackluster guidance.
However, the second-quarter results were better than feared. KeyBanc Capital Markets analyst Justin Patterson pointed out that while the company’s infrastructure spending was high, it struggled to match its peers’ revenue recoveries.
Despite these challenges, there were positive aspects. Engagement metrics showed improvement, with daily active users in North America increasing sequentially for the first time since Q3 2022. Globally, time spent watching content grew compared to last year, and Spotlight content viewing tripled.
On the other hand, Snap might face difficulties due to competition in Augmented Reality from larger companies.
Patterson expressed caution about the investment cycle to win back advertiser budgets, considering the advantages that larger competitors possess in terms of measurement, AI capabilities, and budgets.
Patterson holds a Sector Weight rating on Snap.
In premarket trading, Snap shares fell over 19% to $10.13, according to Benzinga Pro data.
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