A woman stands in front of the Snap Inc logo on the floor of the New York Stock Exchange (NYSE) in New York City, New York, US, March 2, 2017. REUTERS / Lucas Jackson
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May 24 (Reuters) – Snap Inc (SNAP.N) Shares fell more than 40% and launched a sector-wide sell-off on Tuesday after a profit warning from parent company Snapchat signaled tough times in the once-thriving digital advertising industry.
The company was on track to lose $15 billion in market capital, while stocks of major online advertisers and social media companies would collectively lose $200 billion in value from that trajectory.
ID pads (FB.O)Pinterest (PINS.N)Twitter (TWTR.N) The Google Alphabet Alphabet (GOOGL.O) All decreased by between 7% and 24%.
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Snap said Monday that it expects to miss the quarterly revenue and earnings target set just one month ago, and will have to slow hiring and cut spending.
The bleak outlook from one of the industry’s best-known names underscores the impact of the Ukraine war, rising inflation and rising interest rates on social media companies just as they were trying to shake off the blow from Apple’s changes to iOS. Read more
“Snap is an agent of 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.
“Once you start thinking about Google, that’s when the markets start selling.”
Tuesday’s sell-off comes days after a survey of Bank of America fund managers indicated that investors are increasingly bearish in technology stocks, a stark reversal of the bullish trend of the past 14 years.
Snap shares are trading at $13.3, less than their 2017 initial public offering price of $17.
Analysts said Snap’s core earnings forecast suggests expenses will outpace its revenue growth, given that headcount rose 52% in the previous quarter.
“There is a lot to deal with in today’s macro environment,” CEO Evan Spiegel said at a tech conference on Monday.
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(Additional reporting by Medha Singh and Nivedita Balu in Bengaluru.) Editing by Aditya Soni and Anil de Silva
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