Shares of Snap Inc. have fallen sharply. The stock has now hit an all time low of $4.36, a massive drop from its peak of $83.
The company’s market value has also taken a huge hit. It has fallen from over $125 billion in 2021 to just $7.3 billion today. The decline reflects growing concerns about its long term growth.
Snap user growth slows in North America
One of the biggest issues for Snap is slowing growth in its most important market.
While total daily active users rose to 474 million, most of that growth came from weaker monetizing regions. In North America, users actually dropped from 100 million to 94 million.
Europe also saw a slight dip, falling to 98 million users. The only strong growth came from the rest of the world, which reached 283 million users. The problem is simple. North America brings in the most money.
Average revenue per user in this region is $3.62. In comparison, it is just $1.24 in other global markets. Europe stands at $3.47.
This means Snap is growing where it earns less. And shrinking where it earns more. That is not a good mix for long term revenue growth.
Snap faces strong competition from Meta and TikTok
Competition is making things harder.
Meta Platforms continues to dominate with apps like Instagram and Facebook. At the same time, TikTok is rapidly gaining market share.
Snap has limited room to expand in this environment. User attention is already spread across multiple platforms.
Even though revenue grew 10% to $1.76 billion in the latest quarter, most of it still came from North America at $1.02 billion. Europe and the rest of the world contributed much less.
For the full year, Snap generated $5.93 billion in revenue. Losses also narrowed to $460 million, which is an improvement from the previous year.
Snap stock outlook points to further downside risk
Looking ahead, growth is expected to slow further.
Revenue is projected to grow 13% this year and then slow to around 9.4% next year. This kind of slowdown makes it harder to attract investors.
Even though the stock looks cheap, the weak growth outlook is a concern. Some analysts believe Snap could become an acquisition target due to its low valuation.
From a technical view, the stock is clearly in a downtrend. It has broken below key support levels and is trading under major moving averages.
It has also fallen below the important $5 mark, which adds to the bearish sentiment.