over 1 year ago • 3 mins
Snap reported worse-than-expected quarterly results late last week.
What does this mean?
Snap lowered expectations back in May by warning it would miss both its initial revenue and profit growth estimates for the quarter. Just as well: the company’s results were even worse than analysts’ revised expectations. That’s mainly down to Snap’s flailing online advertising business: demand waned as customers cut their marketing budgets, and fierce competition – we’re looking at you, TikTok – stole those that were spending. On top of that, Apple’s iOS privacy updates have been making it harder to roll out targeted campaigns. Snap’s overall revenue grew just 13% in the end, short of the 16% analysts were expecting. Things aren’t looking up, either: the company said revenue has yet to grow this quarter from the same time last year, and that it’ll continue to slow down any hiring in a bid to cut costs.
Why should I care?
For markets: Misery, meet company.
Not even Snap’s new share buyback program could appease investors: they still sent the company’s shares down 25% after the update, meaning its stock has lost about 75% of its value this year. But it didn’t stop there: investors also sent Meta and Alphabet’s stock down 5% and 3% respectively after Snap’s update, likely because they’re wary the same trend will show up in other ad-reliant companies when they report results in the coming week.
Zooming out: When in doubt, sue.
Those investors might be onto something: Twitter reported disappointing quarterly results across revenue, profit, and user growth on Friday. The company chalked some of that up to lagging advertising spending, but also blamed Elon Musk’s fluctuating interest in buying Twitter – and the resulting uncertainty – for the slump. No wonder Twitter wants to put an end to that: the social media giant’s set to take Musk to trial this October over his attempt to pull out of the deal.
Keep reading for our next story...
American Express (Amex) reported impressive quarterly results on Friday.
What does this mean?
Maybe unplanned delays aren’t so off-putting when you can spend them in a snazzy members’ lounge: Amex said spending on global travel and entertainment surpassed pre-pandemic levels for the first time last quarter – despite mass cancellations and delays at airports. That – plus healthy spending by Amex customers across the board – helped boost the value of transactions made on its network up to nearly $400 billion. And in turn, that contributed to upping revenue by a better-than-expected 31% versus the same time last year, enough to hit a new record.
So sure, Amex paid higher costs when all those vacationers made use of their travel perks, but the company’s overall profit still came in higher than expected. And it looks like it’s expecting that to continue: the credit card giant upped this quarter’s forecasted revenue growth from 20% to 25%, and announced plans to spend more on marketing to attract even more customers. Investors couldn’t complain: they initially sent Amex’s stock up 7%.
Why should I care?
The bigger picture: Thanks, inflation.
Credit card companies like Amex have generally benefited from the record high inflation in the US. After all, stores pay them a percentage of the purchase price every time a customer uses their card, so higher prices mean bigger payments. Thing is, some analysts believe those higher prices will eventually prevent a bunch of customers from paying back their debts. Seems like Amex agrees: it put aside $410 million last quarter to cover any losses.
Zooming out: Finally, some good news.
Still, there’s a chance that some of those inflation pressures will let up soon. Russia and Ukraine agreed a deal on Friday that'll allow Ukraine to start exporting grain again, with a goal of meeting pre-war levels in the coming weeks. And since Ukraine is one of the world's biggest grain exporters, the agreement could help bolster global supply, cool down prices, and help prevent famine in developing countries.
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