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Snap Inc. Loses $10 Billion Over Disappointing Quarterly Results

  • Shares of Snap Inc. fell more than 36% after the company reported disappointing results for the second quarter
  • The company reported a net loss of $432 million in Q2 2022
  • The share prices of Alphabet and Meta followed suit, falling 5.6% and 7.6%, respectively

The share price of Snap Inc., the parent company of Snapchat, fell to a new 52-week low following disappointing quarterly earnings and unfavorable future projections. Although the number of daily active users increased 18% to 347 million in the second quarter, the company posted its slowest growth in revenue and reported a net loss of $432 million in Q2 2022 in comparison to a net loss of $152 million a year ago. After the announcement of quarterly results, the company’s share price plunged more than 36%, wiping around $10 billion from the company’s market value.

Unfavorable Environment

The company was affected by spiraling inflation, a sluggish economy, and industry changes that hurt its advertising business. In 2021, Apple updated its privacy settings to allow users to refuse to be monitored by applications, which made it challenging for social media companies to do targeted advertising. Besides, the company is facing increasing competition for its primary demographic of younger users as ByteDance-owned TikTok continues to gain market share in the US and other countries.

Social Media Stocks Faced the Heat

Social media companies in the US saw more than $130 billion wiped off their stock market value, following Snap’s disappointing quarterly results and investors’ concerns about a slowdown in the online advertising market. Social media companies such as Meta Platforms Inc, Alphabet Inc, and Pinterest that rely on advertising were affected as Facebook’s parent company, Meta, was down 7.6%. The share price of Google’s owner, Alphabet, fell 5.6%, while Pinterest’s share price declined 12%.

Tough Times Ahead

According to the company, Q2 2022 turned out to be more difficult than anticipated as the company’s stock lost two-thirds of its value since 2022. The declining demand for Snap’s ad platform, stiff competition, and a difficult economic environment affected its performance. The company stated that it is not issuing guidance for the third quarter as its forward-looking vision remains exceedingly tough.

 



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