What’s going on?
Social media company Snap reported its slowest quarterly sales growth ever late last week.
What does this mean?
Once the darling of teenagers everywhere, Snap spent most of last quarter in a tailspin – shedding workers and unpromising projects with a kind of desperate, flailing abandon. And while some metrics did point upward (daily active users increased by a better-than-expected 19%), most were pretty damning: US users, for instance, spent 5% less time watching content on its platform than this time last year – likely lured away by TikTok, the hipper new kid on the block. And with advertisers slashing budgets anyway, that bad news comes at a particularly tricky time. That could explain why the average revenue per user fell a disappointing 11%, and why overall revenue grew by a tepid 6%. Investors, spooked by those figures and by Snap’s refusal to give guidance for the second-straight quarter, duly sent its stock plunging 27%.
Why should I care?
For markets: Social contagion.
For the third quarter in a row, Snap’s disappointing results have made investors skittish about social media stocks as a whole. The firm’s quarterly report caused shares in companies like Meta, Alphabet, and Pinterest to lose a combined market value of $42 billion, as investors worry those ad-reliant platforms could go the way of Snap. Things might not be as bad for them though: some analysts reckon picky advertisers might just be shifting their smaller budget allocations to the most efficient and proven platforms, like Facebook and Google.
Zooming out:Â Twitter teeters too.
Twitter’s another social media company whose stock dropped on Friday, but the blame for that can’t be pinned entirely on Snap. See, Twitter’s dip came on the back of reports that the US government is subjecting Elon Musk’s ventures – including his deal to buy Twitter – to national security reviews. This is the latest twist in a Musk-Twitter saga that’s beginning to seem like an M. Night Shyamalan film.
—
Originally Posted October 21, 2022 – Snap Back To Reality
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Finimize and is being posted with its permission. The views expressed in this material are solely those of the author and/or Finimize and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
