Shares of social media lost more than $ 135 billion in market value on Tuesday after Snap Inc.’s earnings announcement added to the problems of a sector already recovering from the shutdown of user growth and fears of rising rates.
Shares of Snap depending on digital ads fell 43%, its biggest intraday drop to trading below its initial 2017 public offering price of $ 17. The sale wiped out nearly $ 16 billion in market value and increased the fall of partners such as Meta Platforms Inc., owner of Facebook, Alphabet Inc., Twitter Inc. and Pinterest Inc., owner of Google.
The news stimulated widespread sales in the advertising space and advertising technology. Among the notable falls, Trade Desk Inc. fell 19 percent, fuboTV Inc. lost seven percent, Magnite Inc. lost 13 percent, LiveRamp Holdings Inc. fell eight percent, Roku Inc. Vizio Holding Corp. fell 14 percent. . it dropped nearly 10 percent. In addition, Omnicom Group Inc. fell 8.4% and Interpublic Group of Cos lost 4.9%.
“Right now, our point is that this is more macro-driven and industry-driven compared to Snap-specific,” Piper Sandler analyst Tom Champion wrote in a note.
Others on Wall Street agreed, and Citi analyst Ronald Josey said that “a macro slowdown is likely to affect advertising results across the Internet industry, although we believe that the platforms most exposed to advertising Branding, such as Twitter, Google YouTube, and Pinterest, are likely to have a greater overall impact. “
The owner of the Snapchat app, which sends missing messages and adds special effects to videos, reported in April a quarterly growth in users that exceeded estimates. But with the company saying only a month later that it will not meet previous earnings and profit forecasts, analysts noted a rapid deterioration in the economic environment.
Snap and platforms like Facebook and Google are competing for advertising money at a difficult time. Spiral inflation is putting pressure on businesses and consumer spending, while recent privacy changes, such as Apple Inc.’s tracking restrictions, have slowed companies that were booming for much of the pandemic.
User growth is another major focus of social media companies as they compete to attract new customers to target ads in an already saturated market. In February, Facebook, Meta’s parent company, posted the biggest one-day removal in market value for any U.S. company after saying user additions stalled.
And broader concerns over the technology sector have also affected social media stocks, with the Federal Reserve’s rate hike trajectory weighing especially heavily on technology stocks that are valued in expectations of future growth.
The Nasdaq 100 index fell 2.2 percent on Tuesday, erasing Monday’s advance for the indicator. The high-tech index has dropped 28 percent this year, removing several hundred billion values of Apple’s size to other so-called growth partners like Netflix Inc.