Oh Snap! Social media firms sink after bleak warning from Snapchat parent (updated)

Digital Turbine

24/05/2022 14:41

(Adds comments, details from industry conference on Monday;
updates share movement)
    By Nivedita Balu and Medha Singh
    May 24 (Reuters) - Snap Inc's  SNAP.N  shares plunged nearly
40% on Tuesday after a profit warning from the Snapchat parent
signaled tough times ahead for the once-booming digital ad
industry, sparking a sector-wide selloff.
    The company was on course to erase more than $14 billion in
market value, while Meta Platforms  FB.O , Pinterest  PINS.N ,
Twitter  TWTR.N  and Google-parent Alphabet  GOOGL.O  were
altogether set to lose nearly $140 billion if losses hold.
    Snap said on Monday it expected to miss quarterly revenue
and profits targets that it set just a month earlier and would
have to slow hiring and lower spending.
    The bleak view from one of the sector's most known players
underlines how the Russia-Ukraine war, surging inflation and
rising interest rates are hobbling social media companies at a
time when they had just started recovering the impact of changes
to Apple's iOS operating system.  urn:newsml:reuters.com:*:nL2N2XF2NL
    "Snap is a proxy for online advertising and when you see
weakness there then you automatically think Facebook, Pinterest
and Google," said Dennis Dick, a trader at Bright Trading LLC in
Las Vegas.
    "Once you start thinking about Google, that's when the
markets starts to sell off."
    Tuesday's selloff comes days after a Bank of America fund
managers survey indicated investors are becoming increasingly
bearish on tech stocks, a stark reversal to a bullish trend in
the past 14 years.
    Analysts also said Snap's outlook for core profit suggested
expenses will outpace its revenue growth, given headcount was up
52% in the prior quarter. The company also faces pressure from
TikTok and a shift in ad budgets to Google and Facebook, they
added.
    "There's a lot to deal with in the macro environment today,"
Chief Executive Officer Evan Spiegel said at a tech conference
on Monday.
    
     
    

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 (Reporting by Medha Singh and Nivedita Balu in Bengaluru,
Additional reporting by Akash Sriram; Editing by Aditya Soni)
 ((Medha.Singh@thomsonreuters.com; +91 80 6210 0592; Twitter: https://twitter.com/medhasinghs;))