Social Media Stocks Set to Lose $100 Billion in Snap Warning

Social media stocks are on track to lose more than $100 billion in market value after Snap Inc.’s earnings warning, adding to the woes for the sector, which is already reeling amid of the stagnation of user growth and fears of rate hikes.

The actions of Snap reliant on digital advertising are slated for a record one-day drop, down 32% in pre-market trading. If that move holds, the company will lose about $10 billion in market value. Added to the value of premarket drops to its peers, including meta Platforms Inc., owner of Facebook, Alphabet Inc., owner of Google, Twitter Inc and pinterest Inc., the group may see around $100 billion wiped out.

“At this point, our feeling is that this is more macro and industry-driven compared to Snap specific”Piper Sandler analyst Tom Champion wrote in a note.

others in wall street agreed, with Citi analyst Ronald Josey saying that “A macro slowdown is likely to affect advertising results across the internet sector in general, although we believe that the platforms most exposed to brand advertising, such as Twitter, Youtube from Google Y Painterst, they are probably experiencing a bigger impact overall.”

The application owner Snapchat, which sends disappearing messages and adds special effects to videos, reported quarterly user growth in April that beat estimates. But with the company saying just a month later that it will miss earlier revenue and earnings forecasts, analysts noted a rapidly deteriorating economic environment.

Snap Sinks on Shock Forecast Cut, Weighing in on Peers: Street Wrap

Snap and platforms like Facebook Y Google they’re competing for ad dollars at a tough time. Spiraling inflation is putting pressure on businesses and consumer spending, while recent privacy changes like Apple Inc.’s tracking restrictions have slowed businesses that were booming during much 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, Meta, matrix of Facebookposted the largest one-day drop in market value for any US company after saying user additions plateaued.

And broader concerns about the tech sector have also been weighing on social media stocks, with the path of Federal Reserve of rises of rates which particularly weigh on technology stocks that are valued on expectations of future growth.

Nasdaq 100 futures fell 1.8% in premarket trading on Tuesday, which will reverse most of Monday’s gain for the gauge. The tech index is down 26% this year, wiping out several hundred billion in value from companies like Apple to other so-called growth peers like Netflix inc.

Russ Mould, chief investment officer at AJ Bell, expects US markets to have a bad day when trading begins.

“That, in turn, will put investors in a bad mood and create more storm clouds just at a time when many expected the market decline to be close to bottoming out.” Mold said.