By Reuters | Updated: 22 October 2022
Shares of Snap sank about 25 percent before the bell on Friday, after the owner of photo messaging app Snapchat forecast zero revenue growth for the current quarter, triggering a slide in other social media stocks dependent on advertising revenue.
YouTube-parent Alphabet, Facebook-parent Meta Platform, Pinterest and Twitter all slid between 1.7 percent and 9.2 percent in premarket trade.
“We believe Snap is facing increased competition, primarily from TikTok, both for time spent and increasingly for ad dollars, which is compounding the challenges of a softer macro and Apple’s (privacy-related) changes,” Atlantic Equities analysts said in a note.
The brokerage said competition is likely to continue to increase in 2023.
Snap, on Thursday, reported its slowest revenue growth as a public company for the latest quarter and forecast no revenue growth in the typically busy holiday quarter, while Wall Street analysts were expecting a 3.3 percent rise, according to Refinitiv data.
The company had said in August it would lay off 20 percent of its employees and discontinue projects such as gaming and a flying camera drone to cut costs and brace for a deteriorating economy.
“Given SNAP had been growing headcount over 30 percent y/y for 4 straight quarters, we wonder if the company can execute on its lofty growth objectives with a 20 percent smaller employee base,” Jefferies analysts said in a note.
Snap’s stock, now trading at $8.06 (roughly Rs. 600), has lost about 77 percent of its value so far this year, while Alphabet, Meta and Pinterest have lost between 30 percent and 60 percent. Twitter, however, has gained 21 percent on the prospect of billionaire Elon Musk buying the company.
© Thomson Reuters 2022