Here’s how Snapchat shocked Wall Street
Shares of social media and some digital advertising companies plummeted Tuesday after Snap (a Snapchat platform company) warned that second-quarter ebitda revenues will be lower than expected.
Snapchat collapses on Wall Street and drags other social media apps centered around the advertising business.
Yesterday Snap, which heads the social platform Snapchat, lost 40% in trades at less than $ 16.
The announcement of the company in a document filed Monday afternoon on revenues and EBITDA for the current quarter expected in the lower range of the guidance published at the end of April weighs heavily. The correction of the forecast follows the "further and faster deterioration than expected" of the macroeconomic environment, explained Snap CEO Evan Spiegel.
Additionally, Spiegel warned of slowing growth in a note to employees released on Monday. His message sent a thrill across the digital advertising industry, CNBC highlights. Even though Snapchat is only a fraction of the size of these companies, something in the updated guidance has scared tech investors.
Snap lost a staggering 43.1% of its market cap on Monday. On top of that, Pinterest fell 23.6%, Meta (Facebook's parent company) fell 7.6%, Google lost 5%, and Twitter fell 5.6%.
According to analysts, macroeconomic trends could extend well beyond Snap. "We expect all online advertising platforms to suffer from the impact of a significant consumer withdrawal," Morgan Stanley analysts said in a note to investors on Tuesday. "Advertising is cyclical".
All the details.
SPIEGEL'S WARNING
Snap, based in Los Angeles, previously said it expected an adjusted EBITDA between breakeven and $ 50 million in the second quarter.
But now the company has lowered this forecast.
"Since we released the guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than expected," Snap said in a filing with the Sec.
REDUCE COSTS
So now the company "evaluates the rest of our budgets for 2022," Spiegel said in his statement. In addition, the CEO specified the top management will have to "review spending to find further cost savings".
Additionally, Spiegel said the company will slow hiring for this year and filed an extensive list of issues. “Like many companies, we continue to face rising inflation and interest rates, supply chain shortages and work stoppages, platform policy changes, the impact of the war in Ukraine and more. yet, ”he wrote in the note to employees.
META, PINTEREST AND TWITTER ALSO GO DOWN
Snapchat's profit scare also dragged rivals with a heavy reliance on advertising into Wall Street in the afternoon. Shares of Meta closed down 7.62%, Roku by 13.74% and Pinterest by 23.64%. Alphabet and Twitter fell 4.95% and 5.49% respectively.
THE COMMENT OF THE ANALYSTS
And analysts have also issued their warning.
"Macro headwinds likely extend to all digital advertising," analysts at JMP Securities wrote in a note following the Snap disclosure. They added that brands' budgets, and especially digital ones, "are more at risk of being reduced as companies reduce advertising budgets," while direct response ads, or those that encourage viewers to take immediate action, they are "more related to consumer spending, especially e-commerce."
Also according to Mark Mahaney, an analyst at Evercore ISI, the macroeconomic factors cited by Snap should be relevant for all companies with an advertising platform.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/ecco-come-snapchat-ha-scioccato-wall-street/ on Wed, 25 May 2022 13:42:15 +0000.