Oh snap!
Shares of Snapchat fell 40% on Tuesday morning after the vanishing Photos app raised alarm bells about a slowing economy, killing digital ad revenue.
“The macroeconomic environment has deteriorated more rapidly than expected,” Snap said in a Securities and Exchange Commission filing on Monday, adding that it expects lower revenue and profit for the second quarter.
Companies typically back away from ad spending when the economy slows, translating into less revenue for social media firms like Snap that rely on advertising dollars.
Snap’s SOS attracted investors in the social media and tech sectors more broadly. Shares of Facebook and Instagram parent Meta fell 9.8% to $177.00 shortly after trading opened, while Google was down 7.9% to nearly $2,054.
Meanwhile, Pinterest 26.3 . was accompanied by a steep decline of, at $16.70.
“Snap is a proxy for online advertising and when you see a weakness there you automatically think of Facebook, Pinterest and Google,” said Dennis Dick, a trader at Bright Trading LLC in Las Vegas. “Once you start thinking about Google, that’s when the market starts to sell out.”
A total of about $140 billion was wiped out in tech stocks on Tuesday morning. The tech-heavy Nasdaq Composite Index was down 3.1%.
Snapchat was one of several tech stocks that ballooned during the pandemic, trading as high as $83 in September. But the company’s shares have fallen more than 70% so far in 2022 and were trading around $13.60 on Tuesday morning.
Snap’s struggle also dragged down shares of Twitter, which is grappling with its deal with Elon Musk to take over the company for $44 billion.
Twitter stock was down 3.4% at $36.59 early Tuesday.
Since Musk has agreed to take the company private at $54.20 a share, Twitter’s low stock means that many investors believe the deal will either fall through or that Musk will negotiate a lower price.
post with wires
