Snap scares investors with macroeconomic warning

Snap scares investors with macroeconomic warning

Snap lost nearly a third of its value on Monday after a group of social media outlets reported in unplanned earnings warning that it would be hit by deteriorating macroeconomic conditions.

The Snapchat parent said in a regulatory submission that, since issuing guidelines on its earnings on April 22, “the macroeconomic environment has deteriorated further and faster than expected.”

He added that as a result, he expected revenue and adjusted earnings before interest, depreciation and amortization in this quarter “below the lower end” of his range of guidelines.

In a letter to employees, CEO Evan Spiegel said that while the fundamentals of the business remained “strong”, the company, like others, is facing rising inflation and interest rates, a lack of supply chain and labor disruptions, platform policy changes, impact war in Ukraine and more. ”This macroeconomic environment has hit social media groups directly, as well as advertisers they rely on for revenue.

He said the company would slow down the pace of employment and invest “at a slower pace than we had planned given the work environment”.

The U.S. tech sector has flourished in the last two years as users isolated from coronavirus viruses spend more time and money online.

That wealth is now dramatically and quickly reversinghowever, fears of rising interest rates, slowing economic growth and disruptions in the supply chain triggered a deep and widespread stockpile, leading some of the largest technology groups to curb employment, cut costs and adjust expectations.

Snap shares fell 30 percent in after-hours trading to less than $ 16. Other technology stocks that generate most of their digital advertising revenue have also been hit, with Facebook parent Meta and Google’s Alphabet falling 8 percent and 5 percent, respectively. Meta recently cut its employment targets for 2022, while Uber is also curbing its spending.

Snap will “estimate the rest of our budgets for 2022,” Spiegel said in his letter, adding that “leaders have been asked to reconsider spending to find additional savings.”

The Los Angeles-based snap said earlier that it expects the adjusted ebitda to come between profitability and $ 50 million in the second quarter.

It is also said to forecast revenue growth of between 20-25 per cent over the previous year in the second quarter – compared to 116 per cent sales growth in the second quarter of 2021 during the pandemic.

Apart from the macroeconomic background, Snap faces other obstacles. In October last year, she lost a a quarter of its value after announcing a gloomy forecast for the fourth quarter, blaming the disruption of its advertising business caused by Apple’s changes to the privacy of the iPhone. The policy requires that apps on Apple’s App Store receive explicit permission from users to track them for advertising purposes.

“Our community continues to grow and we continue to see strong engagement across Snapchat and continue to see significant opportunities to increase our average revenue per user in the long run,” Snap said Monday.

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