Shares of Snapchat parent Snap plummeted more than 43 percent within a day after the CEO warned employees of weaker-than-expected second-quarter results, saying the “macroeconomic environment has deteriorated further and faster than anticipated.”
The news hit the online advertising market hard, sending many of Snap’s peers over a cliff as well. Shares of Facebook parent Meta fell 7 percent, Twitter fell almost 4 percent, while Pinterest fell 12 percent. Google parent Alphabet was off more than 3 percent.
Messaging app Snapchat became one of the world’s most popular apps by letting its mostly young users exchange pictures and videos (or snaps) that are meant to disappear.
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Almost two thirds of Snapchat’s total ad audience is age 18 to 34. This includes 226.1 million users age 18 to 24 (39.6 percent) and 126.9 million users age 25 to 34 (22.3 percent).
Snap will miss its own targets for revenue and adjusted earnings in the second quarter, CEO Evan Speigel warned on Monday in a note to employees. The company also said it plans to slow hiring through the end of 2022 in an effort to manage expenses.
“$SNAP is back at the 2018’s levels having lost 80% from its top” tweeted Lex Moskovski, founder and CEO of Social Media SAAS Solutions.
Snap isn’t the first tech company to announce a hiring slowdown or employee layoffs since the market crash. The profits earned by Big Tech during the pandemic appears to be waning since the exodus from tech stocks began in April, Fortune reported.
Facebook parent Meta slowed hiring in May. Netflix reported losing 200,000 subscribers in the first quarter of 2022 and has started laying off employees, as has Robinhood. Uber CEO Dara Khosrowshahi told employees that the company would start to treat hiring “like a privilege.”
The plunging Snap shares due to unexpected weakness in the U.S. economy present “yet more proof that the #Fed is wrong in its assessment that the U.S. economy is strong enough to withstand higher interest rates and QT,” tweeted economist, gold broker and radio host Peter Schiff. “Ad revenue falls as #inflation destroys purchasing power and jobs.”
Snap has lost 84 percent from its $83.34 share price in Srptember 2021, and was trading at $12.79 as of this writing.
“History suggests that advertising is among the first things to go when companies rein in spending, and the current downturn will likely be no different,” CPA and investor Danny Vena wrote for Motley Fool.
Image credit: AdamPrzezdziek, https://www.flickr.com/photos/67683836@N02/