Ticker Symbol: SNAP, GOOG, FB, PINS, TWTR, TTD, ROKU
The parent of the eponymous messaging app Snapchat, Snap Inc, was down over 40% in the morning session today, after CEO Evan Spiegel cut revenue and profit forecasts and promised to slow hiring as the company deals with the fallout from surging inflation. The company’s shares were last trading at $13.40, 21% below its March 2017 IPO price of $17. Other social media and advertising companies, from Meta Platforms and Pinterest to Alphabet and Twitter were also trading down sharply in the morning session.
Snap said in an 8-K filing with the Securities and Exchange Commission last night that the company expects to miss the guidance for the second quarter it provided earlier in April. It expects adjusted earnings before interest, depreciation, and amortization (EBITDA), would now come in below the low end of its view of $0 to $50 million.
The company also expects revenue to miss the low of its second quarter year-over-year growth target of 20-25%. Analysts were expecting secondar quarter 2022 revenue of $1.2 billion versus $982 million in the year ago period. At the current run rate, the company would miss analysts’ quarterly revenue expectations by roughly $40 to $65 million.
The company also said that it would slow hiring towards the second half of the year. Snap expects to add a total of 1,400 employees for the year, after adding 1,800 new staff in 2021. Other companies in the technology space, such as Uber and Facebook parent Meta, have also warned that they will reduce the speed of hiring as costs have increased significantly. Other companies, such as Klarna, Robinhood and Carvana have indicated that they will reduce the number of full-time employees working at their firms.
The macroeconomic turmoil Snap is facing is leading to a rout in the broader technology and communications sector. Alphabet shares are off 7%, Pinterest is down 25%, Meta by 9%, The Trade Desk by 20%, Roku is down 17% and Twitter is also down 4.5% despite anticipation that the company will eventually be acquired by Elon Musk.
Across the two sectors, over $150 billion in market value has been lost on the back of the commentary provided by Snap. The share price movements this morning do seem to suggest that smaller companies could struggle more than their larger peers in managing costs and protecting their margins.
This content is provided for general information purposes only and is not to be taken a investment advice nor as a recommendation for any security, investment strategy or investment account.
