Shares of Meta Platforms, Google-owner Alphabet and other companies that sell digital ads dropped late on Thursday after Snapchat owner Snap Inc blamed inflation for its slowest revenue growth since going public five years ago.
Snap was the first major social media company to release its September-quarter earnings, and its stock tumbled 25% following the disappointing results after the bell. Snap warned that it would see no revenue growth in the normally busy holiday quarter.
Shares of other companies that sell internet advertising also fell, with Facebook-owner Meta (META.O) down about 4%, Alphabet (GOOGL.O) down 2% and Pinterest losing nearly 8%. All together the sell-off in late trading erased over $40 billion in stock market value from those and other internet ad companies, including Spotify and Roku.
Snap’s warning comes after already steep losses in shares of social media companies, with Meta down about 60% year to date, and Pinterest down almost 40%.
Investors worry that the economy could become seriously damaged by the U.S. Federal Reserve’s aggressive interest rate hikes aimed at cooling decades-high inflation.
Last trading at about $8 a share, Snap’s stock has now fallen 90% from its record high close in September 2021. Snap debuted on the stock market in a hotly anticipated initial public offer in 2017 that priced its stock at $17.
In a letter to investors, Snap said inflation caused some advertisers to reduce their marketing budgets.
Revenue for the third quarter ended Sept. 30 was $1.13 billion, an increase of 6% from the prior-year quarter. The figure narrowly missed analyst expectations of $1.14 billion, according to Refinitiv.
The company announced in August it would lay off 20% of all employees and discontinue projects such as gaming and a flying camera drone, in order to cut costs and steel itself against a deteriorating economy.
Alphabet reports its quarterly results on Tuesday, followed by Meta on Wednesday. Reuters