Snap Shares Tank How Market Fears Transfer to Social Media Ads –

Snap shares continued to fall on Friday after being downgraded by analysts after the company missed lower earnings expectations and warned of a difficult macroeconomic environment.

Even more worrying was the company’s failure to provide forward-looking guidance after revising second-quarter expectations. This has raised concerns about the overall impact on companies that rely on advertising and has also led some analysts to question the company’s leadership, including CEO Evan Spiegel and its chief technology officer. bobby murphy Employment has been restored Agreements until 2027.

“To begin with, we lost confidence in the company’s leadership team and their ability to predict its business,” Michael Nathanson, an analyst at Moffett Nathanson, wrote on Friday.

Nathanson downgraded the stock to “market return” from “outperforming” and lowered his target price to $9 from $19, saying it gives the stock a “no confidence rating.”

Snap management is trying to stem losses by cutting costs and slowing hiring, while making long-term investments in augmented reality. But Guggenheim analysts said the lack of visibility around these initiatives led them to revise their investment thesis. Analysts downgraded the stock from $18 to $12 from a “buy” rating to a “neutral” rating.

“Management has noted a focus on cost discipline as growth resumes, but limited detail and visibility, along with the CEO’s inability to proactively address analyst questions, undermined our earlier confidence,” the analysts wrote.

Closed Instant Actions 39 percent on Friday. Several other tech sectors joined the rally, including Meta, which closed down 8%, and Alphabet, down 6%.

This comes after Snap’s management pointed out a number of obstacles affecting its advertising business, including inflation and economic concerns. That, executives said, is leading to a reduction in advertising in the industry, as well as more competition for the advertising dollars that remain.

“These are difficult times for Snap, and it remains to be seen whether many competitors and colleagues see similar things,” said Scott Kessler, vice president and global leader of industrial materials and energy at Third Bridge.

Twitter also reported on this. the second quarter earnings on Friday and missed earnings expectations, citing objections from the advertising industry as well as pending litigation with Elon Musk over his takeover bid.

nathanson damaged Supreme On Friday, it “underperformed” the “market performance” and said the action was one of the biggest risks for advertising declines in traditional media ad formats.

Still, Kessler notes that Snap can be especially sensitive to companies that rely on digital advertising. “Experts we spoke to told us that Snap’s focus and reliance on advertisers from bigger brands made it more vulnerable to budget cuts,” he said.

As Nathanson points out, Snap also faces increasing competition from TikTok in this space and in terms of user numbers (Snap reported daily active users grew 18% year-over-year in Q2 to 347 million and is projected to be 360​ million). millions). the third quarter).

“Also, after years of denying that TikTok competition is an issue, it could be that using Snap and increasing advertising is actually a lot harder than they realize,” Nathanson wrote. “Finally, over the past few months, we’ve been concerned that the digital ad base for 2021 is filled with young, unprofitable companies, and that Snap could be an unwitting beneficiary of this trend.”

Evercore ISI said that while it believes all internet advertising platforms will be affected by the ad decline, smaller platforms like Snap will be hit hardest. It lowered Snap’s rating to “hold” on Friday and stuck to its $14 price target.

“We believe that SNAP, PINS and TWTR are likely to have a much greater impact than META and GOOGL as marketers look to consolidate ad budgets with larger performance-oriented platforms.” We believe this is a key factor behind the increased competition that SNAP is facing,” wrote Evercore analysts.

“Interestingly, the only mid-tier internet ad platform that may not be experiencing a major slowdown in ad revenue is TikTok, where our recent checks indicate only a modest slowdown in growth and over 100% year-over-year growth. year. – added the team of analysts.

In the recent past, Snap has gotten a few bucks off Facebook ads, which could have dampened the overall impact on its business, but those advertisers now appear to have returned to Facebook, analysts say.