Social media shares plunge to wipe out $165 billion after a quick warning

Social media shares lost more than $160 billion in market value on Tuesday after Snap Inc.’s profit warning, adding to the woes of a sector already grappling with stunted user growth and interest rate hike concerns.

Shares in digital advertising-reliant Snap plunged as much as 41 percent, their biggest intraday drop ever, to trade below the $17 2017 initial public offering price. The sale wiped out about $15 billion from its market value. In addition to the value of the declines for peers, including Facebook owner Meta Platforms, and Alphabet Inc. , and Twitter Inc. , and Pinterest Inc. some losses.

The news spurred a massive sell-off across advertising and advertising technology. Among the notable losers, Trade Desk Inc. by 20 percent, and fuboTV Inc. lost. eight percent, and Magnite Inc. lost. 14 percent, and LiveRamp Holdings Inc. fell. down 9 percent, and Roku Inc. with 17 percent, and Vizio Holding Corp. It fell 8.1 percent. In addition, Omnicom Group Inc.’s stock fell. By 6.4 percent, the shares of Interpublic Group lost 4.9 percent.

“At this point, our sense is that this is macroeconomic and industry-based versus Snap’s own,” Piper Sandler analyst Tom Champion wrote in a note.

Others on Wall Street agreed, with Citi analyst Ronald Gozzi saying “It is likely that the slowdown in the macroeconomic environment will affect advertising outcomes across the broader internet sector, although we believe that platforms most exposed to brand advertising – such as Twitter, Google’s YouTube and Pinterest – are You are likely to see a greater impact overall.”

The owner of the Snapchat app, which sends hidden messages and adds special effects to videos, reported quarterly user growth in April that exceeded estimates. But with the company announcing just a month later that it would not meet previous expectations for revenue and profit, analysts noted a rapid deterioration in the economic environment.

Snap and platforms like Facebook and Google are vying for ad dollars at a difficult time. Rising inflation is putting pressure on businesses and consumer spending, while recent privacy changes, such as tracking restrictions imposed by Apple Inc. , to slow down businesses that were thriving during most of the pandemic.

User growth is another big focus for social media companies as they compete to attract new customers to target ads in an already saturated market. In February, Facebook subsidiary Meta published its largest one-day survey by market capitalization ever of any US company after it said user extensions had stopped.

Broader concerns about the tech sector are also hitting social media stocks, with the Fed’s path to raising interest rates particularly affecting tech stocks that are valued on future growth expectations.

The Nasdaq 100 fell more than 3.2 percent on Tuesday, and is set to reflect Monday’s progress of the gauge. The tech heavy index is down 29 percent this year, eliminating several hundred billions from the likes of Apple to other so-called peers like Netflix Inc.

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