What Happened?
Shares of social network Snapchat (NYSE: SNAP) jumped 3.4% in the afternoon session after the company introduced a new AI-powered video generation tool, and an investor dropped a lawsuit concerning its advertising revenue.
Snap announced a new feature for its Lens+ subscribers called "Animate It," which uses the company's own AI model to turn ideas into short videos. This new tool tapped into the broader investor enthusiasm for artificial intelligence.
Adding to the positive news, an investor voluntarily dismissed a lawsuit that had alleged the company hid a technical issue impacting its advertising sales. The stock's rise also came as the broader U.S. stock market gained, with technology companies leading the way.
After the initial pop the shares cooled down to $7.84, up 3.5% from previous close.
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What Is The Market Telling Us
Snap’s shares are very volatile and have had 25 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 11 days ago when the stock dropped 3% on the news that its Chief Executive Officer sold more than 1.2 million shares, while a broader tech sell-off added to the negative sentiment.
According to a regulatory filing, the sales occurred on December 5 and December 8 under a pre-arranged trading plan. The transactions involved a total of 1,259,900 shares of Class A common stock sold at an average price around $8.00. While these sales were planned in advance, large dispositions by top executives can sometimes concern investors.
Compounding the pressure, the wider market was weighed down after Oracle's quarterly revenue disappointed investors, sparking concerns about spending on artificial intelligence and dragging down other tech-related stocks.
Snap is down 30.3% since the beginning of the year, and at $7.84 per share, it is trading 37.7% below its 52-week high of $12.57 from January 2025. Investors who bought $1,000 worth of Snap’s shares 5 years ago would now be looking at an investment worth $150.41.
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