Bloomberg: US social-media companies saw more than $130 billion wiped off their stock-market values, after disappointing revenue from Snap Inc and a lackluster report from Twitter Inc raised new concerns about the outlook for online advertising.
The Snapchat parent plummeted 39%, sinking to its lowest level since March 2020. Meanwhile, Facebook parent Meta Platforms Inc. fell 7.6%, Pinterest Inc dropped more than 13%, and Google owner Alphabet Inc. declined 5.6% in its biggest one-day drop since March 2020.
Twitter also reported quarterly results, though Wall Street remains focused on the company’s legal battle with Tesla CEO Elon Musk, who is attempting to withdraw from a deal to buy the company.
Social media shares are facing a relentless slowdown in advertising revenue at a time when competition from other platforms, such as TikTok, increase. The losses in the group’s shares mark the second selloff sparked by Snap in two months.
Wall Street analysts were quick to react, with more than a dozen brokerages cutting recommendations on Snap’s stock, while many more trimmed their price targets. The shares have slumped nearly 80% this year, while Meta and Pinterest are down about 50%.
“TikTok’s strong engagement and rapid monetization growth are having an outsized impact on Snap’s business,” JPMorgan analyst Doug Anmuth wrote in a note. He cut his rating on the stock to underweight and slashed the price target to a Wall Street low of $9.
Snap didn’t issue financial guidance for the third quarter, except to say that revenue so far in the period is about flat compared with last year. Management also reiterated it plans a “substantially reduced rate of hiring,” echoing plans by Apple Inc. and others.
“The earnings optimism may come to a pause for now,” said Tina Teng, a markets analyst at CMC Markets in Auckland. “Snap’s miss on earnings expectations indicates the severe challenges facing its tech peers, typically on social platforms such as Meta Platforms.”