Snap Stocks Crash After Ad Revenue Woes, Facebook and Alphabet Pulled Down With It
Snap, the parent company of social media app Snapchat, saw stock prices fall 30% on Thursday, according to Bloomberg. By Friday, mid-morning, the stock had plunged from more than $75 per share Thursday to a low of $57.46. The plunge occurred after Snapchat owner warned during the Q3 earnings report that customers are cutting back on ad spending.
Snap’s earnings report fells $93 million short of expectations, according to investment website Seeking Alpha. Additionally, the company forecasted Q4 revenue growth of just 19% to 20%, which would normally be higher as companies invest in advertising for the holiday season and the high-revenue Cyber Week.
Two FAANG stocks, Facebook and Alphabet, which are also ad-revenue driven services, suffered from the news, as well. Facebook stock dropped more than 6% in post-market trading, according to Bloomberg, plunging from just under $342 at market close Thursday to a low of $322.56. By mid-morning on Friday, it continued to hover in the low $320s. Meanwhile, Alphabet stock lost 2.8% in after-hours trading, dipping from $2837.34 Thursday at market close to a low for the week of $2,756.11 in the morning hours on Friday.
Twitter stock was also affected, dipping from a high of $65.40 down to around $63 per share Friday morning. Apple, however, which was blamed for a portion of the decrease in ad revenue, saw a marginal lift in its stock prices, showing gains of less than 1% today.
Snap said that supply chain issues, which can create delays getting holiday gifts to customers, coupled with Apple’s new data collection policies, were to blame for the low revenue forecast. Apple’s new iOS ad tracking methods, which the company has said were designed to increase user privacy, make it more difficult for services like Snap, Facebook and Google to target ads based on browser history.
A majority of Snap’s ad revenue comes from mobile users, as does Facebook’s. Facebook users are nearly exclusively on mobile, with 98.5% of users accessing the network from a mobile device and 81.8% accessing it from a mobile phone, only.
“While we anticipated some degree of business disruption, the new Apple-provided measurement solution did not scale as we had expected, making it more difficult for our advertising partners to measure and manage their ad campaigns for iOS,” Snap CEO Evan Spiegel said. He did not offer solutions for advertisers in the call, nor did he offer solutions for supply chain issues, which he said will worsen as winter approaches. He noted the chip shortage, rising energy prices, broad spikes in inflation, vaccine mandates and an increased spread of COVID-19 as factors that will affect supply chains — and Snap’s prospects for a more profitable Q4.
Peter Cohan of Forbes, along with other investors, are warning people to steer clear of investing in Snap right now.
Likewise, Facebook has yet to fully recover after a sell-off last month following a system-wide shutdown and whistleblower allegations that led to further hearings and closer government scrutiny of the social network. Facebook will report its quarterly earnings on Monday, while Alphabet and Twitter will hold their earnings call for investors on Tuesday.
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Last updated: October 22, 2021