- Facebook parent Meta Platforms fell 8% on Tuesday, erasing $42 billion in market value.
- The decline came after Snap warned about its second-quarter results due to a tough macro environment.
- Investors are extrapolating Snap's weakness onto other social media and digital advertising stocks.
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Snap's second-quarter earnings warning rippled through a number of social media and digital advertising stocks, as investors grow increasingly worried about a slowdown in the economy and the sale of consumer goods.
"Like many companies, we continue to face rising inflation and interest rates, supply chain shortages and labour disruptions, platform policy changes, the impact of the war in Ukraine, and more," Spiegel wrote in a memo to its employees.
Snap noted that "the macroeconomic environment has deteriorated further and faster than anticipated" in 2022.
Shares of Snap plunged by more than 30%, while Pinterest, Alphabet, and Twitter fell 19%, 4%, and 4%, respectively. The warning from Snap altogether erased more than $100 billion in market value for these social media and digital advertising companies.
But some wonder if Snap is a true economic bellwether that makes sense to extrapolate their warning to the broader economy, as the company only does about $5 billion in annual revenue. On the flip side, JPMorgan's Jamie Dimon, CEO of America's largest bank, told investors yesterday that while there are storm clouds hovering over the economy, they may dissipate before they turn into a hurricane.
Snap's warning ultimately could ring true for its peers and the types of goods that are typically advertised on its platform, but that doesn't mean the consumer is entering a significant period of weakness. Instead, it could mean that consumer preferences are shifting rapidly as they stop buying physical goods and start going out and spending on services, travel, and hospitality in what could be the first summer where Covid-19 recedes into the background.