Snap shares plunged 43.1% on Tuesday after the company voiced concern that economic issues could slow the growth of its ad revenues and earnings.
Other companies in the ad tech sector also saw their stocks fall on the news.
Late Monday, Snapchat filed an 8K with the Securities and Exchange Commission announcing that the economic environment has deteriorated faster than expected since the company discussed its expectations for the second quarter and issued guidance to Wall Street that revenues would be up 20% to 25%.
“Even though our revenue continues to grow year-over-year in the second quarter, it's likely that revenue and EBITDA will come in below the low end of our guidance range," the company said.
“It’s certainly something that we're working through along with many other businesses that are impacted, of course, by the supply chain issues, inflation, concerns about interest rates, the war in Ukraine,” it said.
Snap shares dropped by $9.69 a share to close at $12.79.
In addition to Snap, other online advertising companies saw their stocks tumble.
“When thinking about the impact of the open-internet, since the announcement, we've had the opportunity to talk with 10 public and private ad-tech vendors and the general consensus was that the announcement came as a surprise. We have not heard any comments that align around deteriorating conditions but would note that Snap was the first name to report in the space on 4/21, which may have led to the differing perspective,” said analyst Matthew Swanson of RBC Capital Markets.
“More broadly, public and private vendors alike agreed that the macro remains challenging, but that they are not seeing a worsening environment. This was consistent for both brand and performance-based advertisers that we talked with as well as companies with varying degrees of geographic, format and vertical exposure,” Swanson said.
In the media sector, Steven Cahall of Wells Fargo identified several companies that could be impacted by an ad slowdown caused by macroeconomic factors.
Comparing the current situation to the 2020 ad recession, Cahall said, "If this time is similar it likely means that within our coverage CTV (e.g. Roku, Vizio) and AVOD (e.g. Paramount’s Pluto and Fox’s Tubi) will be hardest hit initially. The length and depth of the recessionary slowdown will determine whether pain makes its way to the longer cycle areas of the ad market.”
Roku was down 13.74% to $79.16, Vizio was down 8.8% to $7.74. Paramount was up 0.11% to $8.78 and Fox was down 5.12% to $30. Warner Bros. Discovery was down 7.82% to $16.86, Disney was down 4.01% to $101.59 and Comcast was up 0.44% to $43.07.
Among ad tech stocks, The Trade Desk was down 18.51% to $42.78, Magnite was down 13.15% to $9.25, and Pubmatic was down 15.85% to $18.37.
Facebook stock was down 7.62% to $181.28. Google was down 4.95% to $110.36 and Twitter was down 5.52% to $35.76. ■
