‘Awful’ snap sales wipe $76bn from social media stocks

US social-media companies are poised to see more than $76 billion wiped off their stock-market values Friday, after disappointing revenue from Snap Inc. and a lacklustre report from Twitter Inc. raised concerns about the outlook for online advertising.

The Snapchat parent plummeted 30% in premarket trading. Meanwhile, Facebook parent Meta Platforms Inc. fell 4.8%, Google owner Alphabet Inc. declined 2.8%, and Pinterest Inc sank 7.1%.

Twitter also reported quarterly results on Friday premarket. Shares traded 2.1% lower after the company said second-quarter revenue missed expectations, although average monetizable daily active users were in line with the average analyst estimate.

Social media shares are facing a relentless slowdown in advertising revenue at a time when competition from other platforms, such as TikTok, increase. Friday’s losses in the group’s shares mark the second sell-off sparked by Snap in two months. 

Wall Street analysts were quick to react, with more than a dozen brokerages cutting recommendations on Snap’s stock, while many more trimmed their price targets. The shares have slipped 65% this year, as of their last close, but the average 12-month price target has sunk by more than 72% in the same period. 

“TikTok’s strong engagement and rapid monetisation growth are having an outsize impact on Snap’s business,” JPMorgan analyst Doug Anmuth wrote in a note. He cut his rating on the stock to underweight and slashed the price target to a Wall Street low of $9. 

Snap didn’t issue financial guidance for the third quarter, except to say that revenue so far in the period is about flat compared with last year. Management also reiterated it plans a “substantially reduced rate of hiring,” echoing plans by Apple Inc. and others.

“The earnings optimism may come to a pause for now,” said Tina Teng, a markets analyst at CMC Markets in Auckland. “Snap’s miss on earnings expectations indicates the severe challenges facing its tech peers, typically on social platforms such as Meta Platforms.” 

Vital Knowledge called the results from Snap and hard-disk-drive maker Seagate Technology Holdings Plc “awful” and “ugly.” Already battered tech stocks may face more pressure as earnings season ramps up next week.

“With more and more mega-cap tech companies planning to slow hiring and downgrade their growth expectations, the economic outlook is certainly not in good shape,” CMC’s Teng said.

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