Snap lost nearly a third of its value on Monday after the social media team said in an unscheduled earnings warning that it would be hit by worsening macroeconomic conditions.
The Snapchat Parents said in a regulatory filing that since issuing its 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 to come in this quarter “below the low end” of its guidance range.
In a memo to employees, chief executive Evan Spiegel said that while the fundamentals of the business remained “strong”, the company, like other companies, faced “” rising inflation and interest rates, supply chain shortages and labor disruptions, fundamental policy changes, the impact of the war in Ukraine and more.” This macroeconomic environment has impacted social media direct groups, as well as the advertisers they rely on for revenue.
He said the company would slow hiring and investment “at a slower pace than we had planned for the operating environment”.
The US tech sector has exploded over the past two years as users under coronavirus lockdown spend more time and money online.
Those lucks are now Substantial and fast reverseHowever, concerns about rising interest rates, slowing economic growth and supply chain disruptions have triggered a deep and wide sell-off in stocks, prompting some of the biggest tech conglomerates to curtail hiring. , cut costs and readjust expectations.
Shares of Snap fell 30% in after-hours trading to less than $16. Other tech stocks with the majority of their digital ad revenue were also affected, with Facebook parent company Meta and Google’s Alphabet falling 8% and 5% respectively. Meta recently reduced its hiring target for 2022, while Uber is also keeping its costs under control.
Spiegel said in its memo, Snap will “assess the remainder of our 2022 budget, adding that” leaders have been asked to review spending to figure out how much additional cost savings”.
Los Angeles-based Snap previously said it expected adjusted ebitda to break even and $50 million in the second quarter.
It also said it expects revenue growth of 20-25% year-over-year in the second quarter – compared with 116% revenue growth in the second quarter of 2021 during the time of the pandemic stalling.
Beyond the macroeconomic backdrop, Snap is facing other headwinds. In October last year, it lost a a quarter of its value after the company published a dismal outlook for the fourth quarter, blaming disruptions to its ad business due to privacy changes on Apple’s iPhones. The rules require apps on Apple’s App Store to be explicitly authorized by users in order to track them for advertising purposes.
“Our community continues to grow and we continue to see strong engagement on Snapchat and continue to see significant opportunities to grow our average revenue per user over the long term,” Snape said. said on Monday.
