A woman stands in front of the Snap Inc logo on the floor of the New York Stock Exchange (NYSE) in New York, New York, USA, March 2, 2017. REUTERS / Lucas Jackson
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May 24 (Reuters) – Shares of Snap Inc (SNAP.N) fell more than 40% and sparked a sell-off across the sector on Tuesday after a warning from a profit from Snapchat’s mother signaled hard times ahead for the once-thriving digital advertising industry.
The company was on the verge of losing $ 15 billion in market capitalization, while the shares of major online advertisers and social media companies had to lose a total of $ 200 billion since the defeat.
Meta platforms (FB.O), Pinterest (PINS.N), Twitter (TWTR.N) and Google Alphabet (GOOGL.O) have decreased by between 7% and 24%.
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Snap said Monday that it expects to miss the quarterly earnings and profit targets set just a month earlier and will have to delay hiring and cut costs.
The grim view of one of the sector’s well-known names underscores the impact of the war in Ukraine, rising inflation and rising interest rates on social media companies just as they try to shake off the impact of changes to Apple’s iOS operating system. Read more
“Snap is a proxy for online advertising, and when you see a weakness there, then you automatically think of Facebook, Pinterest and Google,” said Dennis Dick, a trader at Bright Trading LLC.
“Once you start thinking about Google, then the markets start to sell out.”
Tuesday’s sell-off comes days after a survey of fund managers at Bank of America found that investors are falling lower on technology stocks, a sharp reversal of the upward trend over the past 14 years.
Shares of Snap traded at $ 13.3, lower than their 2017 IPO price of $ 17.
Analysts said Snap’s forecast for core profits suggests that spending will outpace revenue growth, given that the number of employees increased by 52% in the previous quarter.
“There is a lot to deal with today in the macro environment,” CEO Evan Spiegel told a technology conference on Monday.
Macroeconomic situation hits social media and digital advertising companies Register now for FREE unlimited access to Reuters.com
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Report by Medha Singh and Nivedita Balu in Bengaluru, Additional reports by Akash Sriram; Edited by Aditya Soni and Anil D’Silva
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