Snapchat developer’s profit warning sends social media stocks tumbling
A profit warning from Snapchat’s developer has sent the company’s shares crashing nearly 40% in early trading, triggering the latest in a series of stock market routs that has wiped billions from the value of social media companies amid fears their revenues will be hit by a global economic downturn.
“Since we issued guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than anticipated,” the company said in an SEC filing published on Monday evening. Snap said it now expected second quarter revenue and earnings below its guidance range, and told staff it would slow the hiring of new recruits.
The company’s profit warning brought its shares down 40% after markets opened, to $13.41, well below the $17 level at which Snap made its initial public offering in 2017. In percentage terms, the fall marked its largest single-day drop ever, with the bad news spilling over to the wider industry: Google’s owner Alphabet fell 6%, Facebook 9% and Pinterest more than 20%.
Concerns about a global economic slowdown have seen advertisers curb spending, which has knocked the valuations of tech companies that rely on marketing spend for the bulk of their revenues.
In a note shared with employees on Monday, the Snap chief executive, Evan Spiegel, warned: “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.”
Spiegel said the company would continue to invest in growth, and planned to hire more than 500 new team members before the end of 2022, a 10% increase in headcount. However, he added that department heads had been asked to find cost savings in their budgets.
“Our
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