Snap shares fall 43% on concern the economy will hurt revenue growth

Shares of Snap plunged 43.1% on Tuesday after the company expressed concern that economic woes could slow its ad revenue and profit growth.

Other companies in the ad-tech sector also saw their shares tumble on the news.

Late Monday, Snapchat filed an 8K with the Securities and Exchange Commission announcing that the economic environment has deteriorated faster than expected since the company discussed its expectations for the second quarter and announced on Wall Street that the revenues would be up 20% to 25%.

“Even if our revenue continues to grow year-over-year in the second quarter, revenue and EBITDA are likely to be below the low end of our guidance range,” the company said.

“It’s certainly something we’re working on with many other companies who are of course affected by supply chain issues, inflation, interest rate concerns, the war in Ukraine,” he said. he declared.

Snap shares fell $9.69 per share to close at $12.79.

Besides Snap, other online advertising companies have seen their shares fall.

“Thinking about the impact of the open internet, since the announcement we’ve had the opportunity to speak with 10 public and private ad technology vendors and the general consensus was that the announcement was a surprise. ‘have heard no comments that align with deteriorating conditions, but note that Snap was the first name to report in space on 04/21, which may have led to a different perspective,’ said RBC Capital Markets analyst Matthew Swanson.

“More generally, both public and private providers agreed that the macro remains challenging, but they don’t see a deteriorating environment. This was consistent for the brand and performance-based advertisers we spoke with, as well as for businesses with varying degrees of geographic, format and vertical exposure,” Swanson said.

In the media sector, Steven Cahall of Wells Fargo identified several companies that could be affected by an advertising slowdown caused by macroeconomic factors.

Comparing the current situation to the 2020 advertising recession, Cahall said, “If this time is similar, it probably means that in our coverage, CTV (eg Roku, Vizio) and AVOD (eg Paramount’s Pluto and Fox’s Tubi) will be the hardest hit initially. the length and depth of the downturn in the recession will determine whether the pain spreads to longer-cycle areas of the advertising market.

Roku was down 13.74% at $79.16, Vizio was down 8.8% at $7.74. Paramount was up 0.11% at $8.78 and Fox was down 5.12% at $30. Warner Bros. Discovery was down 7.82% at $16.86, Disney was down 4.01% at $101.59 and Comcast was up 0.44% at $43.07.

Among ad tech stocks, The Trade Desk was down 18.51% at $42.78, Magnite was down 13.15% at $9.25 and Pubmatic was down 15.85% at $18.37 .

Facebook stock fell 7.62% to $181.28. Google was down 4.95% at $110.36 and Twitter was down 5.52% at $35.76. ■