Los Angeles Times
Snap shares fall 39%, fueling a big tech sell-off
Platform’s ‘awful’ earnings data erase $130 billion in social giants’ stock value.
U.S. social media companies saw more than $130 billion wiped off their stock market values Friday, after disappointing revenue from Snap and a lackluster report from Twitter raised new concerns about the outlook for online advertising.
The Snapchat parent plummeted 39%, sinking to its lowest level since March 2020. Meanwhile, Facebook parent Meta Platforms fell 7.6%, Pinterest dropped more than 13%, and Google owner Alphabet declined 5.6% in its biggest one-day drop since March 2020.
Twitter also reported quarterly results on Friday, though Wall Street remains focused on the legal battle with Tesla Chief Executive Elon Musk, who is attempting to withdraw from a deal to buy the company. The stock rose 0.8% on the day.
Social media shares are facing a relentless slowdown in advertising revenue as competition from other platforms, such as TikTok, is increasing. Friday’s losses in the group’s shares mark the second selloff sparked by Snap in two months.
Wall Street analysts were quick to react, with more than a dozen brokerages cutting recommendations on Snap’s stock, while many more trimmed their price targets. The shares have slumped nearly 80% this year, while Meta and Pinterest are down about 50%.
“TikTok’s strong engagement and rapid monetization growth are having an outsized impact on Snap’s business,” JPMorgan analyst Doug Anmuth wrote in a note. He cut his rating on the stock to underweight and slashed the price target to a Wall Street low of $9.
Snap didn’t issue financial guidance for the third quarter, except that revenue so far is about flat compared with last year. Management also reiterated it plans a “substantially reduced rate of hiring,” echoing plans by Apple and others.
“The earnings optimism may come to a pause for now,” said Tina Teng, a markets analyst at CMC Markets in Auckland, New Zealand. “Snap’s miss on earnings expectations indicates the severe challenges facing its tech peers, typically on social platforms such as Meta Platforms.”
Vital Knowledge called the results from Snap and hard disk drive maker Seagate Technology Holdings “awful” and “ugly.” Tech stocks may face more pressure as earnings season ramps up next week.
“With more and more mega-cap tech companies planning to slow hiring and downgrade their growth expectations, the economic outlook is certainly not in good shape,” Teng said.