Shares of Snap (SNAP) fell 40% on Tuesday and reached their lowest level since March 2020, just after the Covid-19 pandemic hit the United States. The company said in a regulatory presentation that its dire outlook is due to the fact that “the macroeconomic environment has deteriorated more and more rapidly than expected.”
News of Snap’s troubles dragged down the actions of many of his rivals.
The owner of Facebook and Instagram, Meta Platforms (FB) fell by almost 10%, while Pinterest (PINS) fell by almost 30%. YouTube and the parent company of Google Alphabet (GOOGL) fell 8% and the Global X Social Media ETF (SOCL), which owns shares of all these companies, also fell 8%. The social downturn slowed the general mood of the market. The technology-laden Nasdaq was down 3.7% on Tuesday morning. The Dow fell about 500 points, or 1.4%, and the S&P 500 fell more than 2.4%. Twitter (TWTR), which may or may not be acquired by Tesla CEO (TSLA) Elon Musk, the deal is currently pending, fell. 3% too. Shares have dropped nearly 35% from Musk’s original purchase price of $ 54.20 per share.
Investors in social media stocks are clearly nervous that advertisers may be cutting back on marketing spending due to a litany of concerns.
Russia’s invasion of Ukraine has caused oil and gas prices to rise around the world. In addition to rising energy costs, inflationary pressures are also affecting business spending. The recent rise in Covid cases in China is another worrying sign for businesses and consumers.
Snapchat, in particular, has also been hurt by the growing popularity of TikTok and other emerging social networking services that younger users have been turning to, such as Twitch, the video game streaming platform owned by Discord and Amazon ( AMZN). Social media companies have been struggling. with the negative impact on advertising revenue caused by Apple’s privacy changes (AAPL) for users of iPhone and other devices running the iOS platform.
The advertising landscape also worries analysts. Wells Fargo analyst Brian Fitzgerald said in a report on Tuesday that “a widespread recession in the advertising market seems increasingly likely.”
JMP Securities analyst Andrew Boone lowered his target price on Snapchat on Tuesday, saying “the advertising environment is getting worse and we don’t have a clear view that this is the bottom line.”