By Will Feuer

 

Shares of social media and digital advertising companies took a hit in premarket trading as investors digested a mid-quarter warning from Snap Inc., which said revenue and adjusted earnings would likely come in below the projections it issued about a month earlier.

Macro conditions have deteriorated "further and faster" than expected since the company issued its guidance for the current quarter, Chief Executive Evan Spiegel said Monday at a JP Morgan Chase & Co. conference, sparking fears of a digital advertising slowdown.

Mr. Spiegel cited a range of issues, from rising inflation to Apple Inc.'s privacy policy changes to the impacts from the war in Ukraine and other factors.

The warning sent shares of fellow social media and digital advertising companies tumbling. Shares of Facebook and Instagram owner Meta Platforms Inc. were more than 7% lower in the premarket, while Twitter Inc. stock fell almost 4%, now about 40% lower than the $54.20 a share that Elon Musk initially agreed to pay for the company.

Pinterest Inc. stock fell more than 13% in premarket trading and Google parent Alphabet Inc. traded almost 4% lower. Shares of ad-buying platform The Trade Desk Inc. were almost 8% lower. Roku Inc. stock fell almost 5%.

Shares of Snap were hit the hardest, falling almost 30% to $15.93 a share and eliminating nearly all of the company's pandemic gains.

Analysts at KeyBanc cautioned in a research note that while Snap's warning on the macro environment is notable, some of the issues may be unique to Snap. For example, they said, Snap's younger user base may be more sensitive to inflation than the users of other social media companies.

"Given Snap is a low-single-digit percentage of industry ad revenue, we view the 2Q guidance update as a cautionary flag but not one to sound the alarm on the entire sector," the analysts said.

The analysts said larger companies like Meta and Alphabet likely face lower risk in a deteriorating macro environment, while Twitter and Pinterest may be among the most vulnerable right now.

The analysts cut their price target on Snap to $27 a share from $45 a share.

 

Write to Will Feuer at Will.Feuer@wsj.com

 

(END) Dow Jones Newswires

May 24, 2022 06:45 ET (10:45 GMT)

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