Snap plunges more than 25% after CEO warns company will miss revenue and profit estimates, slow hiring

In this screenshot, Snap Inc. CEO Evan Spiegel takes the stage during the virtual Snap Partner Summit 2021 on May 20, 2021 in Los Angeles.

Snap Partner Summit 2021 – Snap Inc | Getty Images

Snap shares plunged more than 25% on Monday after CEO Evan Spiegel warned in a memo to employees that the company will miss its own revenue and adjusted profit targets in the current quarter.

The social media company will also slow hiring through the end of the year as it seeks to manage spending, Spiegel wrote. A portion of the letter was filed with the Securities and Exchange Commission.

“Today we filed an 8-K, sharing that the macro environment deteriorated further and faster than expected when we released our quarterly guidance last month,” Spiegel wrote in the note. “As a result, while our revenues continue to grow year over year, they are growing more slowly than expected at this time.”

In April, Snap announced first-quarter results that beat Wall Street expectations for sales and earnings. At the time, the company said it expected revenue growth of 20-25% year-over-year. It projects adjusted earnings before interest, taxes, depreciation and amortization of between $0 million and $50 million.

“We believe it is now likely that we will report revenue and adjusted EBITDA below the low end of the guidance range we provided for this quarter,” Spiegel wrote in Monday’s update.

Snap’s industry peers plummeted on the news. Shares of Meta, Facebook’s parent company, fell 7% in after-hours trading. Twitter fell almost 4%, while Pinterest slid 12%.

Spiegel said Snap will continue to recruit new employees, but will slow its pace of hiring for the rest of the year. It still expects Snap to hire 500 new employees before the end of the year, according to the memo. The company has hired approximately 2,000 employees over the past 12 months.

The Snapchat app maker is facing rising inflation and interest rates, supply chain shortages, labor disruptions and platform policy changes like the feature privacy policy of Apple’s iPhone, according to Spiegel. There is also a negative impact of the war in Ukraine.

“Our most significant gains over the next few months will come from improving the productivity of our existing team members,” Spiegel wrote.

As of Monday’s close, Snap shares were down more than 50% for the year, compared to a 17% decline for the S&P 500. After hours, the stock fell 28% to $16.15 . If it were to fall more than 26.6% on Tuesday, it would be the worst day for the stock since the company went public in 2017.

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