It came as somewhat of a surprise to many investors when SNAP (NASDAQ: SNAP) announced a reduction in its earnings guidance as the company stated that it was on track to meet its guidance range only a month ago.
In Snap’s securities filing, the company explained the bad news, writing:
“The macroeconomic environment has deteriorated further and faster than anticipated. As a result, we believe it is likely that we will report revenue and adjusted EBITDA below the low end of our Q2 2022 guidance range.”
After the earnings were published, Snap’s CEO, Evan Spiegel, sent out an internal email to Snap employees that laid out some of the company’s plans to right the ship. He stated that the company would slow hiring and look for ways to reduce costs.
Spiegel again blamed macroeconomic factors for the company’s struggles, stating:
Investors were nonplussed with these developments and sold off the stock in droves; the stock tanked 43%, its largest intraday decline in company history, and resulted in a share price below its 2017 IPO price. In total, more than $16 billion was lost by Snap investors.
Unfortunately, Snap acted as the canary in the coal mine for the industry. Their struggles led to further declines in online ad-supported companies that have already been on a downtrend, including Trade Desk (NASDAQ: TTD) (-19%), fuboTV (NYSE: FUBO) (-7%), Roku (NASDAQ: ROKU) (-14%) and Alphabet (NASDAQ: GOOGL) (-8%). It’s believed that the collateral damage reached more than $160 billion in losses for investors.
The silver lining to all of this is that analysts, for the most part, agree that Snap’s problems are due to macroeconomic forces and not any mismanagement on Snap’s part. Once macroeconomic factors like the war in Ukraine and the COVID-19 pandemic are in the rear-view mirror, look for Snap to regain some lost ground.
Shares of Snap closed Thursday’s trading session at $14.81 per share, up +4.59% on the day. YTD SNAP stock is down -68.21%.
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Disclaimer: Wealthy VC does not hold a position in any of the stocks mentioned in this article.