Snap spooks investors with macroeconomic warning. Social media company’s shares plunge after it says conditions have ‘deteriorated further and faster than anticipated’.
The sunglasses, social media, camera company – or whatever Snap Inc. is – has yet again been sliced in (almost) half, as Snap shares plunged 43% on Tuesday. Putting the company on pace for its worst day ever and dragging down other social media and digital ad company stocks.
The tumble comes after Snap, Inc. (NYSE: $SNAP) issued a warning on Monday to investors saying it won’t meet its own targets for revenue and adjusted earnings in the current quarter. The social media group said in an unscheduled earnings warning that it would be stung by worsening macroeconomic conditions.
In the memo to staffers, chief executive Evan Spiegel said that while the fundamentals of the business remained “strong”, the company, as with others, faced “rising inflation and interest rates, supply chain shortages and labor disruptions, platform policy changes, the impact of the war in Ukraine and more”. This macroeconomic environment has hit social media groups directly, as well as the advertisers on which they rely for revenue.
The US technology sector had boomed over the past two years as users under coronavirus lockdowns spent more time and money online.
Those fortunes are now dramatically and rapidly reversing, however, as fears over rising interest rates, slowing economic growth, and supply chain disruptions have triggered a deep and broad stock sell-off, prompting some of the biggest tech groups to curb hiring, cut costs and readjust expectations.
Snap’s shares are down about 84% from a 52-week high in September 2021 and are off more than 72% year to date.
Shares of Meta (NASDAQ: $FB) closed down 7.62%, Roku (NASDAQ: $ROKU) fell 13.74% and Pinterest (NYSE: $PINS) dropped 23.64%. Alphabet (NASDAQ: $GOOGL) and Twitter (NASDAQ: $TWTR) dipped 4.95% and 5.49%, respectively.
Trade Desk (NASDAQ: $TTD) fell 18.51%, Magnite (NASDAQ: $MGNI) slipped 13.15% and PubMatic (NASDAQ: $PUBM) closed down 15.85%.
“We expect all online ad platforms to feel some impact of a significant consumer pullback,” Morgan Stanley analysts said in a Tuesday note to investors. “Advertising is cyclical.”
“We see no real reason to not take Snap’s negative pre-release at face value. Digital advertising is cyclical, but like all advertising, and Macro headwinds are very likely getting much harder,” Evercore ISI analysts said in a Monday note.
This is unlikely the end for Snap’s slide and with the murky outlook, we wouldn’t touch it (or any of the other social media companies) with a 10-feet pole.
Some of our previous notes on Snapchat:
2020, February – $Snap Part II – Short Again
2019, January – Snap – Dead Man Walking
2018, September – Snap – A Sinking Ship
2018, May – $Snap, Crackle, and Pop
2017, November – Snap – The Final Chapter
2017, July – Morgan Stanley to Snap “Do We Know You?”
Sources: CNBC, Financial Times, Yahoo Finance