Snap Inc. (NYSE: SNAP) shares plunged to their lowest level since early 2020, dragging down social media sector-related exchange traded funds, after reporting lackluster quarterly results in face of slowing advertisement revenue.
The Global X Social Media ETF (SOCL) declined 5.4% on Friday.
Meanwhile, Snap Inc. shares plummeted 38.3% on Friday toward their lowest level since March 2020 and were on pace for its second-worst trading session on record after suffering its worst sell-off just two months ago. SNAP makes up 7.3% of SOCL’s underlying portfolio.
The parent company of Snapchat revealed second-quarter revenue increased by 13%, its slowest rate of growth ever after going public, the Wall Street Journal reported.
Snap attributed the slowdown to “increasing competition for advertising dollars that are now growing more slowly.”
Social media platforms in general are facing increased competition for advertising dollars from the rising popularity of competitors like TikTok.
Consequently, several Wall Street analysts, along with many brokerages, have downwardly revised their recommendations on Snap, with many lowering their price targets.
“TikTok’s strong engagement and rapid monetization growth are having an outsized impact on Snap’s business,” JPMorgan analyst Doug Anmuth said in a note.
RBC Capital Markets analysts also lowered their price target to $10 per share, warning in a note that Snap’s guidance “confirmed our fears that ad spending is worsening.”
Snap’s moves may reflect the broader sentiment in the tech industry. Management has reiterated plans for a “substantially reduced rate of hiring,” mirroring decisions from Apple Inc. and others.
“The earnings optimism may come to a pause for now,” Tina Teng, a markets analyst at CMC Markets, told Bloomberg. “Snap’s miss on earnings expectations indicates the severe challenges facing its tech peers, typically on social platforms such as Meta Platforms.”
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