Concerns about the outlook for online advertising
Author of the article:
Bloomberg News
Ryan Vlastelica, Subrat Patnaik and Abhishek Vishnoi
Snap Inc plummeted as much as 30 per cent in premarket trading. Photo by Michael Nagle/Bloomberg U.S. social-media giants were poised to see more than US$76 billion wiped off their stock-market values Friday after disappointing revenue from Snap Inc. raised concerns about the outlook for online advertising.
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The Snapchat parent plummeted as much as 30 per cent in premarket trading. Meanwhile, Facebook parent Meta Platforms Inc. fell 4.8 per cent, Google owner Alphabet Inc. declined 2.8 per cent, Twitter Inc. slipped 2.5 per cent and Pinterest slumped 7.2 per cent.
The losses mark the second major selloff sparked by Snap in two months, as its results become a barometer for investors trying to decipher how economic uncertainty is affecting advertising spending. There are growing signs that tech companies are preparing for a recession with some pulling back on hiring, while Meta has lost about half of its value this year after disappointing revenue forecasts.
Wall Street analysts were quick to react, with at least nine brokerages cutting recommendations on Snap’s stock, while many more trimmed their price targets. The shares have slipped 65 per cent this year, but the average 12-month price target has sunk by more than 72 per cent in the same period.
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“TikTok’s strong engagement and rapid monetization growth are having an outsized impact on Snap’s business,” JPMorgan analyst Doug Anmuth wrote in a note. He cut his rating on the stock to underweight and slashed the price target to a Wall Street low of US$9.
Snap didn’t issue financial guidance for the third quarter, except to say that revenue so far in the period is about flat compared with last year. Management also reiterated it plans a “substantially reduced rate of hiring,” echoing plans by Apple Inc. and others.
“The earnings optimism may come to a pause for now,” said Tina Teng, a markets analyst at CMC Markets in Auckland. “Snap’s miss on earnings expectations indicates the severe challenges facing its tech peers, typically on social platforms such as Meta Platforms.”
Vital Knowledge called the results from Snap and hard-disk-drive maker Seagate Technology Holdings Plc “awful” and “ugly.” Already battered tech stocks may face more pressure as earnings season ramps up next week.
“With more and more mega-cap tech companies planning to slow hiring and downgrade their growth expectations, the economic outlook is certainly not in good shape,” CMC’s Teng said.
Bloomberg.com
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