Snapchat shares nosedived 40% on Tuesday morning after the disappearing-photos app sounded alarm bells about a slowing economy killing digital advertising revenue.
“The macroeconomic environment has deteriorated further and faster than anticipated,” Snap said in a Securities and Exchange Commission filing on Monday, adding that it’s expecting lower revenue and profit for the second quarter.
Companies generally pull back from advertising spending when the economy slows, translating to lower revenue for social media firms like Snap that rely on ad dollars.
Snap’s SOS spooked investors across social media and the tech sector more broadly. Shares of Facebook and Instagram parent Meta plummeted 9.8% to $177.00 shortly after trading opened, while Google notched a 7.9% loss to trade around $2,054.
Pinterest, meanwhile, was down a whopping 26.3% at $16.70.
“Snap is a proxy for online advertising and when you see weakness there then you automatically think 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 markets starts to sell off.”
Roughly $140 billion in total was wiped off tech stocks Tuesday morning. The tech-heavy Nasdaq Composite Index was down 3.1%.
Snapchat was one of many tech stocks that ballooned during the pandemic, trading as high as $83 in September. But the company’s shares have plummeted more than 70% so far in 2022 and were trading around $13.60 on Tuesday morning.
Snap’s struggles also dragged down shares of Twitter, which is battling with Elon Musk over his agreement 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 many investors believe that the deal will either fall through or Musk will negotiate a lower price.
With Post wires
Credit: Notigroup Newsroom.
[Written in collaboration with other media outlets with information from the following sources]