Snap Incs profit warning sends ripples through social media stocks

div classBodysc17zpet90 cdBBJodivpReuters – Snap Incs shares slumped 30 before the bell on Tuesday after a profit warning from the social media company signaled tough times ahead for the oncebooming industry, sparking a sectorwide selloff.p

pThe owner of Snapchat was on course erase about 10 billion from its market value, while larger players Meta Platforms and Googleparent Alphabet Inc were both down more than 4.pdivdivdiv classBodysc17zpet90 cdBBJodiv

pSnap said on Monday it expected to miss quarterly revenue and profits targets that it set just a month earlier, citing a fasterthanexpected downturn in the economy.p

pLike companies across sectors, Snap faces pressure from inflation, labor shortages and rising interest rates that have raised fears of a global economic slowdown.p

p“This suggests that in just a month, the environment has aggressively deteriorated further. We see no real reason to not take Snaps negative prerelease at face value,” Evercore ISI analyst Mark Mahaney said.p

pWhile the weakening economy is the main factor, competition from TikTok and a shift in ad budgets to Google and Facebook are also hurting the company, he added.p

pAnalysts also said Snaps outlook for core profit suggested expenses will outpace revenue growth in the period, given headcount was up 52 in the prior quarter.p

pWhile demand for online advertising picked up during the pandemic when consumers spent more time on social media, changes to Apples iOS operating system have dulled the industrys growth prospects .p

pThe warning from Snap also weighed on the wider market, with futures tracking Nasdaq 100 index down nearly 2. [.N]p

pA Bank of America fund managers survey for May indicated investors are becoming increasingly bearish on tech stocks, a stark reversal to a bullish trend in the past 14 years. Allocation to tech has also dropped month over month by 23 percentage points, according to the survey.p

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pp Reporting by Medha Singh and Nivedita Balu in Bengaluru Editing by Aditya Sonip

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