Snap lost almost a third of its value on Monday after the social media group said in an unscheduled earnings warning that it would take a hit from worsening macroeconomic conditions.
Snapchat’s parent company said in a regulatory filing that since it issued earnings guidance on April 22, “the macroeconomic environment has deteriorated faster and faster than anticipated.”
It added that as a result, it expected revenue and adjusted earnings before interest, depreciation and amortization this quarter “below the low end” of its guidance range.
In the memo to employees, CEO Evan Spiegel said that while business fundamentals remained “strong,” the company, like others, faced “rising inflation and interest rates, supply chain shortages supply and labor disruptions, platform policy changes, the impact of the war in Ukraine, and more.” This macroeconomic environment has directly affected social media groups, as well as the advertisers they rely on for revenue. .
He said the company would slow hiring and invest “at a slower pace than we had planned given the operating environment.”
The US tech sector had been booming in the past two years as users under coronavirus lockdowns spent more time and money online.
However, those fortunes are now being dramatically and quickly reversed, as fears over rising interest rates, slowing economic growth and supply chain disruptions have triggered a deep and wide sell-off in equities. , prompting some of the biggest tech groups to rein in hiring, cut costs and readjust expectations.
Snap shares fell 30 percent in after-hours trading to below $16. Other tech stocks that get most of their revenue from digital advertising were also hit, with Facebook parent Meta and Google’s Alphabet falling 8% and 5%, respectively. Meta recently lowered its hiring targets for 2022, while Uber is also reining in its costs.
Snap will “evaluate the rest of our budgets for 2022,” Spiegel said in his memo, adding that “leaders have been asked to review spending to find additional cost savings.”
Los Angeles-based Snap had previously said it expected adjusted EBITDA to be between breakeven and $50 million in the second quarter.
It also said it anticipated 20 to 25 percent year-over-year revenue growth in the second quarter, compared to 116 percent growth in sales in the second quarter of 2021 during the pandemic lockdowns. .
Beyond the macroeconomic context, Snap faces other obstacles. In October last year, he lost a quarter of his worth after posting a dismal outlook for the fourth quarter, blaming the disruption to his ad business caused by Apple’s iPhone privacy changes. The rules require apps on Apple’s App Store to get explicit permission from users to track them for advertising purposes.
“Our community continues to grow and we continue to see strong engagement on Snapchat, and we continue to see significant opportunities to grow our long-term average revenue per user,” Snap said Monday.
Reference-www.ft.com