Tech

Snap spooks markets with macroeconomic warning

Snap shed nearly a third of its value on Monday after the social media group said in an unscheduled profit warning that it would be hit by worsening macroeconomic conditions.

The Snapchat parent company said in a regulatory filing that “the macroeconomic environment has continued to deteriorate faster than expected” since it released earnings guidance on April 22.

It added that as a result, it expected revenue and adjusted earnings before interest, depreciation and amortization this quarter to be “below the low end” of its guidance range.

In the memo to employees, Chief Executive Evan Spiegel said that while the company remained “strong,” the company faced “rising inflation and interest rates, supply chain shortages and work disruptions, changes in platform policies, and the impact of the war in Ukraine and.” more”.

He said the company will slow the pace of hiring and “invest more slowly than we planned given the operating environment.”

Snap will “evaluate the remainder of our 2022 budgets,” Spiegel said, adding that “executives have been asked to review spending to find additional cost savings.”

The US tech sector had boomed over the past two years as users increasingly spent more time and money online amid the coronavirus pandemic. These fortunes are now reverse dramatically and quicklyas fears of rising interest rates, slowing economic growth and supply chain disruptions have sparked a deep and broad stock sell-off, prompting some of the biggest tech giants to rein in hiring, cut costs and readjust expectations.

Snap’s shares fell 30 percent to below $16 in after-hours trading. Other tech stocks, which derive the majority of their revenue from digital advertising, were also hit, with Google’s Meta and Alphabet falling 8 percent and 5 percent, respectively. Meta recently lowered its hiring targets for 2022, while Uber is also restricting its costs.

Based in Los Angeles snap had previously announced that second-quarter adjusted ebitda would be between break-even and $50 million.

It had also said it expected revenue growth of 20 to 25 percent year-on-year in the second quarter — compared to 116 percent revenue growth in the second quarter of 2021 during the pandemic lockdowns.

Beyond the macro backdrop, Snap is already facing other headwinds. The company shed a quarter of its value in October last year after releasing a gloomy fourth-quarter outlook and blaming the disruption of its advertising business by Apple’s iPhone privacy changes. The rules require apps on Apple’s App Store to get explicit permission from users to track them for advertising purposes.

“Our community continues to grow and we continue to see strong engagement with Snapchat and continue to see significant opportunities to grow our average revenue per user over the long term,” Snap said Monday.

Snap spooks markets with macroeconomic warning Source link Snap spooks markets with macroeconomic warning

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