Social media stocks crash as Snap’s results disappoint

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Snap

The markets continue to remain as jittery as ever. In particular, investors are paying close attention to the earnings of popular tech stocks, eyeing any warning signs that growth might be slowing down. That’s what happened today with social media stocks, particularly Snap (NASDAQ: SNAP). The company suffered its worst day ever after warning that its future financial results could be weaker than expected.

Snap, which operates Snapchat, issued a filing report that warned its second-quarter earnings would show revenue and profit figures towards the low end of its previous guidance. This unexpected update came just one month after the company issued its previous guidance.

Since we issued guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than anticipated,” read the SEC filing. “As a result, we believe it is likely that we will report revenue and adjusted EBITDA below the low end of our Q2 2022 guidance range.”

Snap had originally forecast revenue growth between 20-25% for the year, while adjusted earnings would either break even or climb to $50 million in a best-case scenario. Those results aren’t necessarily poor, especially as some companies started reporting losses this quarter. Up until now, Snap has consistently beaten analyst expectations for the past couple of years.

Snap CEO Evan Spiegel also sent a memo to employees today saying that the company will slow down its hiring for the rest of the year in an effort to save on expenses.

Shares of Snap were down a staggering 43.1% over the course of the day, eradicating around $20 billion worth of market cap. That’s the single worst day in the company’s history as a publicly-traded company.

Other similar social media stocks, including Pinterest, were also down as much as 23.5% as well following the news. Companies involved with online and smartphone advertisements are expected to struggle amidst new privacy stipulations from Apple and other phonemakers.

While Snap and Pinterest were down on the news, the selloff quickly expanded into the rest of the tech sector. This included giants like Meta, Google, and Twitter, all of which were down between 5-8% as well. Other digital-advertising companies, including the Trade Desk and Digital Turbine, were down by the double digits today as well.

For some investors, this broader selloff seems like an overreaction. Traders are so jittery right now with everything going on that they’re looking for any reason to dump a stock, especially if it’s a growth company. It also didn’t help that famous investors like Ray Dalio recently warned that we’re entering a period of stagflation, similar to what happened in America in the 1970s. Couple that with the possibility of another contagion spreading and the war in Ukraine, investors have a lot to be worried about at the moment, and this concern spills over into earnings news.

 

Snap Company Profile

Snap, which refers to itself as a camera company, has one of the most popular social networking apps, Snapchat, in developed regions such as North America and Europe. The firm has approximately 319 million daily active users. Snap generates nearly all its revenue from advertising with 72% coming from North America, mainly the U.S. The firm is headquartered in Venice, California. – Warrior Trading News

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