Disappointing revenue posted by Snap Inc. raises concerns about online advertising. The US social media giants reacted by losing $47 billion in market capitalization in extended trading on Thursday.
According to Bloomberg News, the parent company of Snapchat plunged 27% in the after-hours trading session. Pinterest Inc. and the parent company of Facebook, Meta Platform Inc., both fell 4%. Twitter Inc and Alphabet Inc., owners of Google, also declined.
Sectoral impact
Snap has sparked the second major sell-off in a sector in two months. The results have become a barometer of how investors figure out the economic uncertainties impacting spending on digital advertisements.
Slowing down of hirings in the tech sectors are signs of how these companies are preparing for a recession. Meta has already lost about half of its market value in 2022 after forecasts of poor results.
Auckland-based market analyst at CMC Markets Plc. Tina Teng said that there would be a pause in earning optimism. Snap Inc. missing out on its earnings estimates shows the severe pressure faced by peers in the tech sector, especially players like Meta Platforms.
Snap Inc. saw its market capitalization of $6 billion erased after trading hours on Thursday. It did not issue any financial roadmap for its third quarter, and the company only said that the revenues for the second quarter were flat compared to last year. It said that Snap Management had confirmed its plans to reduce hirings similar to Apple Inc.’s and others’ plans.
Market commentator Vital Knowledge called the results of Seagate Technology Holdings Inc., makers of hard disk drives, and Snap Inc. “ugly” and “awful.” The already battered stocks in the technology sector will face more pressure next week when their earnings are declared next week.
CMC Market’s Teng says that economic expectations do not look in good shape as several mega tech companies are planning to slow hirings and downgrade estimates on growth.
