Snap presented results for the third quarter of 2022, surprising that earnings per share beat analysts’ expectations by just 0.08 cents. Sales were up 5.7% year-over-year, with revenue of $1.128 billion versus $1.067 billion.
However, despite being above estimates on earnings per share, the revenue value was below expectations of $1.139 billion.
Snap was the first major internet company to release its third-quarter results for the year. Due to a decline in ad spending, the company had the slowest quarterly sales growth in its history, causing its shares to fall 28%. This year, Snap is trading at its lowest level since February 2019.
The company’s report served as an insight into what to expect from the results of larger companies such as Alphabet and Meta Platforms. Several investors are selling their social media stocks, so Snap and Twitter trigger a $35 billion loss in social media stocks.
Snap insiders see a negative outlook for the company. Confidence inside the company is shallow, as insiders have been selling their shares for $3.3 million in the last three months.
The problems at Snap spread to the rest of the social networks because the fear of an economic slowdown is deepening and could hurt companies relying on digital advertising for revenue. Companies such as Meta Platforms Inc, Alphabet Inc, Pinterest Inc, and Trade Desk Inc fell.
Adding to the problems of inflation and little economic growth, Apple Inc. has new rules where that require all apps to get permission from smartphone users to be tracked online. This makes it difficult for advertisers to measure and manage their advertising campaigns, which could be one of the main causes of the slowdown in this market.
On the other hand, Twitter’s stock has been famously volatile since Elon Musk announced his bid to buy the social media platform in April. This week was no exception. Wall Street thought the deal was close to closing, but news surfaced that US authorities were discussing whether they should subject some of Musk’s companies to national security reviews, including the deal for Twitter. With this, the deal is now poised to fall even further below Musk’s offer price of $54.20 due to uncertainty.
These social media issues shouldn’t be the only concern for investors in the tech sector. Also, the US is likely to consider extending its China ban to some of the most powerful emerging computer technologies. As a result, this puts pressure on stocks across the group and caused the Nasdaq 100 index to drop nearly 0.4% on Friday.
Against this backdrop, do you think social media stocks will recover soon?
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