Snapchat shares have plunged 41% in intraday trading on Tuesday as after the company’s bleak outlook on the economy and its earnings.
The sell-off has seen other social media stocks tank, Facebook parent Meta Platforms down 9%, Alphabet -6%, and Twitter -4%. A look at the sector shows a combined loss of over $180 billion since Snap’s Monday earnings report that included forecast cuts.
In a comment on the overall scenario in the social media group, Bloomberg’s Kriti Gupta says ad spend is likely a “proxy for global growth.”
Pointing to a 10-year chart on social media companies’ ad spend growth versus the economy, Gupta says:
What you are seeing is a kind of a boom cycle with these massive gains that kind of stalls out as the economy stalls.”
She adds that one of the reasons social media companies are likely to see major losses in earnings is the fact that pandemic-era usage of social media platforms is gone, with no more lockdowns to hanker people down onto their devices.
More notably though, is that advertisers are not likely to spend as much on ads and marketing if they don’t know if the consumers are actually going to spend their money on products and services advertised on these platforms.
It’s a macro fear that’s”baked” into the market and reflected not just in Snapchat’s forecast slash, but across many of the other social media companies.
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