Snap stock down 20% on Q1 earnings: buy the dip?

Snap Inc (NYSE: SNAP) opened nearly 20% down on Friday after reporting a decline in revenue for it first financial quarter.

Snap sees continued decline in revenue

The stock is under pressure because the company’s internal forecast couldn’t cheer the shareholders either.

Snap now sees between $1.0 billion to $1.09 billion in revenue in its current quarter – slightly below the Street estimates and suggesting another 6.0% year-on-year hit to revenue, as per its letter to shareholders.

Last week, the social media company launched a series of AI products. For the year, Snap stock is down 4.0% at writing.

Notable figures in Snap Q1 earnings

Lost $328.7 million versus the year-ago $359.6 million
Per-share loss narrowed marginally from 22 cents to 21 cents
Earned a penny per share on an adjusted basis in Q1
Revenue slipped 7.0% year-on-year to $988.6 million
Consensus was a penny per share loss on $1 billion in revenue
Global DAUs climbed to 383 million – a million below estimates
Average revenue per user of $2.58 also missed expectations

Buy Snap stock on the weakness?

Snap attributed the weakness in the recent quarter to changes it made to its ad platform that it agreed are disruptive for now but will eventually help increase click-through conversions in the future.

Still, RBC Capital Markets analyst Brad Erickson reiterated his “neutral” rating on Snap stock today and said:

We remain side-lined on the view that this is a largely upper-funnel platform offering structurally lower conversions levels leading to share loss, barring a fuller macro rebound.

He also trimmed his price target to $9.0 a share that doesn’t represent a meaningful upside from here.