Shares of social media companies lost more than $135 billion in market value after Snap Inc.'s profit warning, adding to the woes of a sector already struggling with stunted user growth and interest rate hike concerns, according to Bloomberg.
Shares in the digital advertising-reliant Snap Inc plunged 43%, its biggest intraday drop ever, to trade below the $17 initial public offering price of $17. The sale wiped out nearly $16 billion of market value, adding to declines seen by peers, including Meta Platforms, owner of Facebook, Alphabet, Twitter and Pinterest.
The news spurred a broad sell-off, and among the notable losers, TradeDesk shares shed 19%, Fubu TV Inc lost 7%, Magnet lost 13%, LiveRamp Holdings shed 8%, and Roku Inc fell by 8%. 14%, and Vizio Holding Corp. is down nearly 10%. In addition, Omnicom Group fell 8.4 and Interpublic Group lost 4.9%.
Other Wall Street analysts agreed, with City analyst Ronald Gozzi saying: “The macroeconomic slowdown is likely to affect advertising outcomes across the broader internet sector, although we believe platforms are more exposed to branded ads - such as Twitter, Google's YouTube and Pinterest. You are likely to see a greater impact overall.”
The company that owns the Snapchat app, reported quarterly user growth in April that exceeded estimates. But with the company announcing just a month later that it would not meet previous expectations for revenue and profit, analysts noted a rapid deterioration in the economic environment.
Snap and platforms like Facebook and Google are vying for ad dollars at a difficult time. Rising inflation is putting pressure on businesses and consumer spending, while recent privacy changes, such as Apple's tracking restrictions, have slowed businesses that have been thriving during most of the pandemic.
User growth is another big focus for social media companies as they compete to attract new customers to target ads in an already saturated market. In February, Facebook subsidiary Meta published its largest one-day survey of market capitalization ever of any US company after it said user extensions had stopped.
Broader concerns about the tech sector are also hitting social media stocks, with the Fed's path to raising interest rates particularly affecting tech stocks that are valued on future growth expectations.
The Nasdaq 100 is down 2.2% on Tuesday, erasing Monday's advance. The tech heavy index is down 28% this year, leading to a loss of several hundred billions for companies like Apple and Netflix.