Snap (SNAP) Erases 2-Year Gains on Earnings Warning, Time To Sell?

Shares of social media company Snap (NYSE: SNAP) plunged over 30% in after hours trading on Monday in  a vicious start to the week for big tech, especially Snap’s social rivals Facebook, Twitter and Pinterest; who all suffered a sharp sell-off after Snap CEO Evan Spiegel’s foreboding earnings warning disclosed a likely earnings miss for the current quarter. Spiegel also pointed to other expenses that are weighing on bottom line growth, including the costly hiring process that has welcomed 2,000 new employees in the last 12 months. 

To the unfortunate reality of many company’s, macro headwinds are here to stay for the near fiscal future. Whilst revenue might still be growing year over year, increasing costs, inflation and various other headwinds mean growth is starting to slow at an alarming rate.

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Selling took hold of SNAP shares in April, when the company’s first-quarter earnings failed to hit the mark set by Wall Street. Looking forward, the company stated it expects between 20% and 25% year-over-year growth in revenue, with adjusted earnings of between $0 and $50M. Wider guidance has been a prominent feature of the current earnings landscape as company’s grapple with uncertainty. In this case though, Snap is expecting revenue and EPS below the low end of the guidance range.

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The news quickly trickled down to social media companies that are hinged to online advertising; Facebook’s Meta dropped 7%, Twitter fell 4%, and Pinterest slid the most at 12%. Alphabet also dropped 3% in after-hours trading as big tech fights to keep its head above water amid inflation and interest rates, supply chain shortages and labor disruptions. SNAP has now officially erased all of it’s public trading gains over the last few years, with current share levels sitting 0.2% below the company’s public listing price.