Snapchat’s Stock Dropped as a Result of the Warning

Tuesday was not a particularly happy day on Wall Street. Following an unsettling earnings warning from Snapchat’s parent company, social media stocks dropped. Snap (SNAP) stock fell more than 40% on Tuesday, reaching its lowest level since March 2020, soon after the Covid-19 outbreak hit the US.

Snapchat’s Stock Fell Down

The company’s bleak forecast was attributed to “the macroeconomic climate deteriorating farther and faster than anticipated,” according to a regulatory filing. Snap’s problems knocked down the stock prices of many of its competitors. Meta Platforms (FB), the parent company of Facebook and Instagram, plummeted by over 8%, while Pinterest (PINS) fell more than 20%. The Global X Social Media ETF (SOCL), which owns shares in all of these businesses, slumped 8%. YouTube and Google parent Alphabet (GOOGL) also lost 5%.

The market’s overall attitude was dampened by the social setback. The Nasdaq, which is dominated by technology, was down 2.5 percent on Tuesday. The S&P 500 fell over 1%, while the Dow remained unchanged.

Twitter (TWTR), which may or may not be acquired by Tesla CEO Elon Musk (TSLA) – the deal is now on hold — also plummeted 5%. The stock has dropped over 35% since Musk’s initial buyout bid of $54.20 per share. Investors in social media firms are plainly concerned that advertisers may reduce marketing spending owing to a slew of issues.

The invasion of Ukraine by Russia has caused global oil and gas prices to rise. Inflationary pressures are making a dent in business spending, in addition to increasing energy costs. Another concerning sign for businesses and consumers is the recent increase of Covid instances in China.

Popularity of Other Sites

The increased popularity of TikTok and other developing social media sites that younger users have been migrating to, such as Discord and Amazon (AMZN)-owned game streaming site Twitch, has affected Snapchat in particular.

Apple’s (AAPL) privacy improvements for users of iPhones and other devices based on the iOS platform have had a detrimental impact on advertising revenue for social media companies.

Analysts are also concerned about the advertising landscape. In a study released Tuesday, Wells Fargo analyst Brian Fitzgerald stated that “a wide ad industry slump is increasingly likely.”

“The advertising climate is worsening, and we have no clear opinion that this is the bottom,” JMP Securities analyst Andrew Boone said Tuesday, lowering his price target for Snapchat.

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