Wall Street was not in a particularly social mood on Tuesday. Social media shares tumbled following an ominous earnings warning from parent Snapchat.
Shares of Snap (SNAP) plunged more than 40% on Tuesday and hit their lowest level since March 2020, just after the Covid-19 pandemic hit the United States.
The company said in a regulatory filing that its bleak outlook was due to “the macroeconomic environment deteriorating further and faster than expected.”
News of Snap’s woes sent shares of many of its rivals plummeting.
Meta Platforms (FB), owners of Facebook and Instagram, fell almost 10% while Pinterest (PINS) fell more than 20%. YouTube and Google parent Alphabet (GOOGL) fell 6% and the Global X Social Media ETF (SOCL), which owns shares in all of these companies, fell 8%.
The social setback has clouded the general mood of the market. The tech-laden Nasdaq fell 2.6% on Tuesday afternoon. The Dow Jones fell almost 150 points, or 0.4%, and the S&P 500 fell more than 1.3%.
Twitter (TWTR), which may or may not be acquired by Tesla (TSLA) CEO Elon Musk – the deal is currently on hold – also fell 4%. The stock is now down nearly 35% from Musk’s original takeover bid price of $54.20 per share.
Investors in social media stocks are clearly concerned that advertisers will cut marketing spend due to a litany of concerns.
Russia’s invasion of Ukraine has caused oil and gas prices to soar around the world. In addition to rising energy costs, inflationary pressures are also weighing on business spending. The recent rise in Covid cases in China is another worrying sign for businesses and consumers.
Snapchat, in particular, has also been hit by the growing popularity of TikTok and other emerging social media services that younger users are flocking to, such as Discord and the Amazon-owned video game streaming platform (AMZN). , Twitch.
Social media companies are grappling with the negative impact on advertising revenue caused by Apple’s privacy changes (AAPL) for users of iPhones and other devices running on the iOS platform.
The advertising landscape also worries analysts. Wells Fargo analyst Brian Fitzgerald said in a report on Tuesday that “a broad advertising market slump looks increasingly likely.”
JMP Securities analyst Andrew Boone cut his price target on Snapchat on Tuesday, saying “the advertising environment is deteriorating and we’re not clear if that’s the bottom.”
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