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SNAP and the Fragile State of Digital Advertising

Snapchat's stock has been silenced by the market this year. Is the company an opportunity or a landmine for investors?

September 20, 2022 – By Simon Erickson

Snap, Inc (NYSE: SNAP) has been snapping lately. And we don’t mean that in the good way of making music with your fingers — but rather that it’s showing serious signs of breaking as a business.

Snap reported slowing growth and disappointing guidance in its recent third quarter report, which prompted a rather significant restructuring of the entire company. CEO Evan Spiegel announced Snap would be laying off 20% of its workforce and sunsetting several of its growth initiatives in order to prioritize free cash flow generation. Among the programs that are getting cut is its ‘Snap Originals content’, its ‘Pixy’ flying camera, and its ‘Minis & Games’ entertainment.

The question that’s now facing investors is whether these problems are company-specific. Is this an issue with Snap having a bloated internal structure? Or is it an indication of more serious problems brewing in the digital advertising industry?

In today’s 7investing podcast, 7investing lead advisors Anirban Mahanti and Simon Erickson dig into Snap’s recent woes. They take a closer look at its underperforming programs, its leadership decisions, and its stock-based compensation — while also discussing external factors that are impacting the tech industry. They also discuss whether Snap’s 75% year-to-date in 2022 is an opportunity or a falling-knife for investors.

Anirban and Simon recorded this episode of the 7investing podcast live. If you would like to attend future live recordings of our podcast — including our upcoming discussion on September 21st about Big Tech embracing custom chips — you can sign up for free at our new 7investing Events page.

Publicly-traded companies mentioned in this interview include Alphabet, Amazon, Microsoft, and Snap, Inc. 7investing’s advisors or its guests may have positions in the companies mentioned.


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