- Snap (NYSE:SNAP) has issued a grim Q2 earnings forecast
- The company cited worse-than-expected economic headwinds as the driving factor
- Other social media and tech stocks are falling alongside it today
Snap (NYSE:SNAP) is falling hard today after the company issued a negative profit warning. Shares of the social media giant have declined more than 40% since markets opened today. After a week of remaining stagnant, SNAP stock is hitting levels it hasn’t seen in more than two years. This pattern has sparked negative momentum for the already troubled tech sector.
Why Are Tech Stocks Down Today?
Snap’s leadership attributes its recent woes to powerful economic headwinds. In a recent 8-K filing, the company issued the following statement: “Since we issued guidance on April 21, 2022, 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.”
Yesterday, SNAP stock fell 30% in extended trading after CEO Evan Spiegel informed his staff that the company would miss its own quarterly targets both for revenue and adjusted earnings. He added that Snap would be slowing its hiring practices.
It’s understandable that this type of guidance prediction would make investors nervous. But since markets opened today, the momentum spurred by Snap’s bad news has pushed other Big Tech stocks down. Meta Platforms (NASDAQ:FB) is down more than 9% for the day, while Pinterest (NYSE:PINS) is down 22%. Things aren’t much better outside the social media sector. Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has fallen 6%, and Amazon (NASDAQ:AMZN) is down more than 3%.
While Snap has shed $15 billion in market value today, the collective sector has lost more than $160 billion amid the selloff. This makes sense when we consider Snap’s status as a digital advertising proxy. When investors see weakness in it, they can easily become nervous about its larger peers such as Facebook and Google.
As trader Dennis Dick of Bright Trading notes, “The back half of the earnings season has seen major disappointments. Expectations are a lot lower, but these companies seem to be finding a way to even get under the lower bar.”
What Comes Next
While Snap has plunged more than any other tech stock today, other experts chalk it up to broader economic forces. “At this point, our sense is this is more macro and industry-driven versus Snap specific,” states Tom Champion of Piper Sandler.
That sentiment goes back to Dick’s earlier point that other tech companies recently reported disappointing earnings. But as InvestorPlace contributor Joel Baglole reports, “The warning has clearly put a scare in already nervous investors who are concerned about slowing growth among tech stocks as interest rates rise to counter high inflation.”
While these social media companies will ultimately recover, these are turbulent times, and economic headwinds are likely to get worse before they improve. The forces that pushed tech stocks down today are not unique to Snap, but they will persist until markets stabilize and readjust to rising interest rates.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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