What Happened?
Shares of social network Snapchat (NYSE: SNAP) jumped 3.1% in the morning session after amid a broad market rally as Federal Reserve Chair Jerome Powell signaled potential interest rate cuts. The social media company's shares benefited from a broad market rally after Federal Reserve Chair Jerome Powell indicated that interest rate cuts could be on the horizon. Powell's comments sent a wave of optimism through Wall Street, causing major indexes like the Dow Jones Industrial Average, S&P 500, and Nasdaq to climb sharply. Investors reacted positively to the prospect of easier monetary policy, which generally boosts growth-oriented technology stocks by potentially lowering borrowing costs and improving the overall economic outlook.
After the initial pop the shares cooled down to $7.17, up 1.7% from previous close.
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What Is The Market Telling Us
Snap’s shares are very volatile and have had 25 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 16 days ago when the stock dropped 17.7% on the news that the company reported disappointing second-quarter financial results, driven by a revenue miss and a critical error on its advertising platform. The social media firm posted revenue of $1.34 billion, which fell short of analysts' $1.35 billion forecast. A key metric, average revenue per user (ARPU), which measures how much money the company made from each user, also disappointed at $2.87, below the expected $2.90. Chief Executive Evan Spiegel explained that a flawed update to its advertising platform caused ad campaigns to be priced substantially lower than intended. Adding to investor concerns, the company's net loss widened from the prior year, and it announced the departure of its senior vice president of engineering. While daily active users grew, the positive user numbers were overshadowed by the company's struggles to effectively monetize its platform.
Snap is down 36.2% since the beginning of the year, and at $7.17 per share, it is trading 44.2% below its 52-week high of $12.86 from December 2024. Investors who bought $1,000 worth of Snap’s shares 5 years ago would now be looking at an investment worth $343.56.
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