Shares of social media companies plummeted on Friday after Twitter Inc (TWTR.N) and Snapchat’s owner indicated that advertisers were tightening their purse strings in reaction to a bleak economic outlook.
Pinterest Inc sank 11.3 percent, Facebook-owned Meta Platforms Inc (META.O) declined 5.6 percent, and Alphabet Inc (GOOGL.O), which also sells advertisements online, fell 3.3 percent.
At current market values, Pinterest, Meta, Twitter, Alphabet, and Snap were projected to lose approximately $42 billion in market value. Twitter also blamed the unexpected drop in quarterly revenue on its protracted battle to close Elon Musk’s $44 billion acquisition. In turbulent trading, shares of the microblogging site fell 0.1 percent.
According to Snap Inc. on Thursday, advertisers are cutting back on spending as interest rates rise and inflation rises, while some companies face labor shortages and supply chain delays.
“If you want proof that companies are nervous about the economic outlook, just look at how media platforms and marketing agencies are bemoaning a tougher advertising market,” Russ Mould, AJ Bell investment director, said. As Apple Inc’s (AAPL.O) privacy rules further cloud forecast, investors are bracing for the worst worldwide revenue growth in the social media sector’s history.
Snap Inc’s shares fell 36.4 percent and were the most highly traded on U.S. markets after the firm indicated it was searching for new revenue sources to grow.
“Unfortunately for Snap and the digital ad market,” RBC Capital Markets wrote in a note. The focus now shifts to next week’s quarterly releases from mega-cap corporations Meta and Alphabet. According to several analysts, the reduction in their share prices reflects what is expected to be a mediocre report.
“While more revenue cuts for advertising stocks are likely, we think Alphabet has more relative revenue stability given breadth of advertisers, more expense flexibility than most peers,” analysts at Bank of American Global Research said.
