Snapchat (NYSE: SNAP) shares fell over 40% on Tuesday morning after the company cautioned that the slowing economy was greatly affecting digital advertising revenue. The bad news puts the company on track for its worst day in history and has simultaneously impacted other social media and digital ad company stocks.
“Since we issued guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than anticipated,” the parent company of Snapchat said in an SEC filing.
Social media investors are cautious of the possibility that advertisers may be pulling back on spending amid the current economy. Russia’s invasion of Ukraine has also led to concerning changes, such as the rise of oil and gas prices. Furthermore, the continuous spread of the coronavirus pandemic in China is yet another worry for both businesses and consumers.
“We expect all online ad platforms to feel some impact of a significant consumer pullback,” Morgan Stanley analysts said in a Tuesday note to investors. “Advertising is cyclical.”
JMP Securities analyst Andrew Boone lowered his price target of Snapchat on Tuesday, explaining that “the advertising environment is worsening and we have no clear view that this is the bottom.”