Snapchat owner’s profit warning sends investors running for cover

SHARES in Snap, the owner of social media app Snapchat, plunged more than 40pc yesterday after its boss warned of slower than predicted sales growth and a reduction in hiring.

Evan Spiegel, the company’s chief executive, blamed the “challenging macroeconomic environment” in an internal staff note,reported by Bloomberg, saying Snap’s revenues for the current three-month period would be lower than its previous predictions.

“Like many companies, we continue to face rising inflation and interest rates, supply chain shortages and labour disruptions, platform policy changes, the impact of the war in Ukraine and more,” said Mr Spiegel.

Snap’s share price sank to $13.32 in afternoon trade, down from Monday’s $22.47 close. Eight months ago Snap hit an all-time high of $83, meaning it has lost about 75pc within the space of a year.

The chief executive also warned that Snap’s pre-tax profits could be as low as “breakeven”, with a potential high of $50m (£40m).

Snap’s share price drop was mirrored by other social media companies. Meta, the owner of Facebook and Instagram, saw its price tumble by nearly 10pc in afternoon trading, while shares in the social network Pinterest slumped by 24pc.

In April, Snap predicted its revenues would grow between 20pc and 25pc. For its last three-month reporting period, the company recorded revenues of $1.06bn against predictions of $1.07bn, blaming the shortfall on advertisers who cancelled campaigns after Russia’s February invasion of Ukraine.

Mr Spiegel told staff that the pace of hiring would slow down at Snap as a result of the shrinking revenues, adding that managers had been ordered to make cost savings.

In a stock exchange filing, Snap said its community “continues to grow” despite the company’s financial challenges, highlighting what it described as “significant opportunities” to increase its average revenue per user (Arpu).

That Arpu figure stood at $3.20, a fall of $0.74 over the preceding 12 months. Snap has, however, grown its daily active users to 332m, up from the previous year’s 319m.

Tech stocks have all dropped in recent weeks, with traders panicking as news of spiralling inflation competes with interest rate rises, signalling potential belt-tightening by consumers in the second half of this year.