Snap Inc. An unexpected warning about a deteriorating economy by chief executive Evan Spiegel spread through the internet and social-media stocks late Monday, potentially ruining market recovery efforts since the start of the day.
After the market closed with strong gains on Monday, Spiegel spoke at a JPMorgan technology conference and the company said in a regulatory filing that its second-quarter earnings would fall below its previous estimate. At the conference, Spiegel said the economy “must have deteriorated faster than Snap SNAP.”
It was expected when it made its forecast during its earnings call last month. He added that Snapchat Guardians has been slowing down its hiring for years and looking for ways to reduce costs.
Shares of Snap fell more than 30% in after-hours trading, and stocks of other Internet and social-media companies fell with: Alphabet Inc. GOOGL,
Down 3.6%, Facebook’s main meta platforms Inc. FB,
7% lower, Pinterest Inc. PINS,
Decreased 12%, and Twitter Inc. TWTR,
Lost an additional 3.7%, following a roller-coaster ride last week when Elon Musk claimed the company was stuck with its deal to buy.
Spiegel said Snap, like many other businesses, is working on supply-chain issues, inflation, concerns over interest rates and the war in Ukraine. “There’s a lot to deal with in the macro environment today, but we’re focusing on the long term and really investing through it,” he said.
Snap’s comments could signal a further downturn in the Internet sector, with the macro economy slowing down as the overall Internet advertising slump. It is noteworthy that last year, when Apple Inc.’s AAPL influence,
Privacy changes were felt across platforms that rely on advertising revenue, with Snap and Facebook hit the hardest.
This time around, however, Snap could be a canary in coal mining for the larger Internet sector, which has been under great pressure since the technological breakdown so far this year. When the S&P 500 Index SPX,
About 17% down, personal stocks down a lot from year to date: Alphabet down about 23%, Meta down 40%, Pinterest down about 38%, where Twitter – briefly pumped by Mask’s $ 44 billion takeover bid – now this year About 12% less.
A handful of tech giants have talked about spending in the changing environment in recent weeks and even cutting some jobs. Netflix Inc. NFLX,
Which has seen the first decline in customer growth since day one, cutting 150 employees and reducing costs; Robinhood Markets Inc. Hood,
Uber Technologies Inc.
For the time being, the cost is being reduced in other ways.
Snap’s comments could also affect the ongoing soap opera on Musk’s deal to buy Twitter at $ 54.20 a share. Musk wants the deal suspended, as he claims that the number of spam / fake accounts on Twitter is about 5% wrong, and he believes that could be too much. Twitter counter said it expects the deal to be completed at the current agreed price, but the market clearly does not expect the deal to be completed at the current price, which now appears to be massively inflated (Twitter shares closed at $ 37.86 per share on Monday). Twitter shareholders are expected to approve the deal at the company’s annual meeting on Wednesday.
The market returns Monday from a brief dip in the bear area last week, but that rally could be short-lived. The last two years of the epidemic have been a big race for tech stocks, but now they have become the biggest drag on the overall market. It’s not yet clear if Snap is any kind of bellwether, but it could be another indicator of even worse news.