Snap shares plummeted 34% in off-hours markets after issuing a proft warning yesterday at the close of the US market. The company announced that it will miss its second-quarter sales and profit guidance as macroeconomic conditions deteriorate, with factors such as inflation, the war in Ukraine, bottlenecks or labor shortages negatively affecting advertising budgets. .
In its fall it drags other social networks. The company will also slow hiring, filling 500 positions before the year is out, CEO Evan Spiegel said in a note to staff. “Like many businesses, we continue to grapple with inflation and interest rates, supply chain shortages and labor disruptions, platform policy changes, the impact of the war in Ukraine, and more,” he wrote in the post. note obtained by Bloomberg.
Snap benefited from a surge in usage of its Snapchat app during the pandemic, as people sought entertainment and connection from home. Now, when people return to the company, they are reeling from the same combination of economic pressures that its competitors are also facing.
“The macroeconomic environment has deteriorated faster and faster than anticipated,” Snap said in a presentation. “As a result, we believe we are likely to see revenue and Adjusted EBITDA below the lower end of our guidance range for the second quarter of 2022.”
The company’s forecast for the second quarter, 20% to 25% year over year revenue growth of annual revenue, was already below analyst estimates.
The warning immediately affected other companies dependent on advertising, such as Meta Platforms Inc, Twitter Inc, Alphabet Inc. and Pinterest Inc.
Companies “are having to lower these unrealistically unattainable investor expectations again,” Dan Suzuki, deputy director of Dan Suzuki, deputy chief investment officer of Richard Bernstein Advisors, said on Bloomberg Television on Monday.
“Underlying growth is slowing as these companies mature and become more competitive.” Suzuki’s firm, which has about $15 billion of assets under management, does not own Snap shares directly.
All platforms are competing for advertising dollars at a difficult time. Advertisers are grappling with a shaky economy as well as recent privacy changes like Apple Inc.’s tracking restrictions on Apple Inc., which have slowed booming businesses during much of the pandemic.
Facebook’s parent company, Meta, cut spending last month due to the macroeconomic environment. Twitter recently announced a hiring freeze and other cost-cutting measures to try to save money.
“The global macroeconomic environment has become less supportive, the war in Ukraine has affected our results, and may continue to do so.” in our results, and may continue to do so,” Twitter CEO Parag Agrawal said in an email to employees. “Many other companies have been experiencing a similar effect.”
Spiegel told employees that company leaders have been asked to review spending, to see if there are other areas worth cutting. “Our most significant gains in the coming months from the productivity of our team members,” he wrote.
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