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Tuesday, June 28, 2022

Why Snap Snapped but Albemarle Powered Higher Tuesday

Stocks got a nice bounce on Monday, although it was unclear whether the positive momentum would last into Tuesday. Investors remain concerned about the lack of consistency from companies reporting their latest financial results, as well as ongoing macroeconomic and geopolitical worries more broadly. As of 7:45 a.m. ET, futures on the Dow Jones Industrial Average (^DJI 0.00%) were down 160 points to 31,679. S&P 500 (^GSPC 1.86%) futures had fallen 35 points to 3,937, while Nasdaq Composite (^IXIC 0.00%) futures were lower by 168 points to 11,868.

As has often been the case in recent weeks, there was plenty of good news and bad news from different companies. Snap (SNAP -3.40%) suffered a big decline as shareholders weren’t pleased with the social media company’s latest warning, but Albemarle (ALB 2.75%) said good things about the state of its business that made its investors even more optimistic about its future. Read on to learn more about both of these businesses.

Snap warns of poor business conditions

Shares of Snap dropped nearly 30% in premarket trading on Tuesday morning. Investors responded unfavorably to the Snapchat parent’s disclosure that it expects not to match its previous guidance for the second quarter of 2022.

Image source: Getty Images.

In a filing with the U.S. Securities and Exchange Commission, Snap said the macroeconomic environment has deteriorated to a greater extent and more quickly than it had anticipated when it first issued guidance on April 21. The social media platform provider now believes it will probably report sales and adjusted pre-tax operating earnings that will fall below the lower end of the ranges it had previously provided as guidance for investors.

Snap tried to cushion the blow by noting that it remains excited about its long-term growth prospects. In particular, the Snap community is still expanding, with strong engagement on Snapchat and ample areas in which to grow revenue per user over longer periods of time.

Investors have been worried about the volatility in Snap’s stock price for a long time, and the big rise and fall in the stock since mid-2020 has been gut-wrenching. With bigger questions coming up across the social media industry, Snap is finding its shareholders to be less patient than they were in the past.

Albemarle looks energized

Elsewhere, shares of Albemarle saw a smaller but more positive move. The stock climbed between 1% and 2% in premarket trading following the lithium producer‘s latest increase to its previous guidance for the full 2022 year.

Albemarle had already anticipated significant growth due to extremely strong demand for lithium for electric vehicle (EV) battery production and other uses. Yet late Monday, the natural resources company said it had made even more progress toward renegotiating its variable-priced contracts with customers than it had anticipated. The net result will be even better bottom-line performance than previously expected, for both its lithium and bromine businesses.

In particular, Albemarle boosted its revenue projections by $600 million, to a new range of $5.8 billion to $6.2 billion. Adjusted earnings got a boost of between $2.75 and $3.05 per share, with Albemarle now expecting between $12.30 and $15 per share on the bottom line. Average realized pricing and production volume also got increased guidance due to favorable business dynamics.

With so much attention going to the energy transition to EVs, Albemarle has a unique opportunity. As a leader in the lithium business, the company is doing its best to take advantage of that opportunity.


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