What Happened:
Shares of social network Snapchat (NYSE: SNAP) fell 5.16% in the morning session as investors remained on edge ahead of the critical Fed meeting. Despite recent bank failures, the consensus expectation is for the Fed to hike rates by 25bps, tightening economic conditions even further. JP Morgan's recent acquisition of First Republic Bank marked the third collapse of an American bank since March and has added to concerns about the overall health of the banking sector. Fears are mounting that a sector-wide pullback in lending could magnify the rate hikes meant to tame the economy and cause a more pronounced economic slowdown which could negatively impact all sectors from tech to consumer to industrials alike.
What is the market telling us:
Snap's shares are quite volatile and over the last year have had 75 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was 5 days ago, when the company dropped 19.8% on the news that the company reported first-quarter revenue that missed analysts' revenue expectations, with both daily active users and revenue per user below expectations. EBITDA also missed. This marks the fifth straight quarter of topline revenue miss. SNAP’s business is likely experiencing company-specific issues, as advertising and social media peers have broadly reported fine to good results.
Snap is down 5.82% since the beginning of the year, and at $8.34 per share it is trading 72.4% below its 52-week high of $30.16 from May 2022. Investors who bought $1,000 worth of Snap's shares 5 years ago would now be looking at an investment worth $755.67.
Is now the time to buy Snap? Access our full analysis of the earnings results here, it's free.