Shares of social media companies sank sharply on Friday, after Twitter and the owner of Snapchat signaled a cut in spending on digital advertising as economic growth weakens.
Pinterest shares tumbled 12.2%, Meta, which owns Facebook, fell 5.8%, and Alphabet, which owns Google and also sells online ads, lost 3%.
At current prices, Pinterest, Meta, Alphabet and Snap collectively lose $36 billion in market value.
In the second quarter, Twitter’s revenue fell 1% to $1.18 billion, and it failed to meet the user growth estimates analysts had hoped for. The company attributed its results to its current battle to close its acquisition by Elon Musk in exchange for 44,000 million dollars. Shares of the micromessaging site fell 1%
Advertisers have cut spending amid rising interest rates and rising inflation as some of them struggle with labor shortages and supply chain disruptions, Snap said Thursday.
“If you want proof that companies are nervous about the economic outlook, just look at media platforms and marketing agencies bemoaning a tougher ad market,” said Russ Mould, chief investment officer at AJ Bell. .
Investors are bracing for the slowest global revenue growth in the history of the social media sector, as Apple’s privacy changes further cloud the outlook.
Shares of Snap fell 36% and were the most traded on US stocks, a day after Snapchat’s owner missed earnings targets and declined to make a forecast.
Snapchat’s owner’s weak quarterly outlook confirms fears that ad spending is getting worse, RBC Capital Markets said in a note. “Unfortunately for Snap and the digital advertising industry, we believe there are signs of further cuts in ad spending.”
Meta and Alphabet will report their quarterly results next week, while Pinterest will report its second-quarter results on August 1.
The drop in social media firms dragged down the S&P 500 and the Nasdaq, which fell 0.8% and 1.7%, respectively.
With information from Reuters.
