SNAP Stock Plunges 40% on Huge Profit Scare

  • Snap (NYSE:SNAP) stock is down 40% on Tuesday after spooking investors with its outlook for the second quarter
  • The company also missed analyst estimates for its Q1 revenue and earnings
  • Other internet and social media companies are stumbling alongside Snap today
Advertiser Appeal and Innovations Will Continue to Lift Snap Stock
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Snap (NYSE:SNAP) stock is down 40% today after the social media company warned that it is likely to miss its own targets for revenue and adjusted earnings in the current second quarter.

It filed the earnings warning with the U.S. Securities and Exchange Commission (SEC). Additionally, a memo to employees by Snap CEO Evan Spiegel confirming the likely earnings miss has become public. In the memo, Spiegel said that Snap plans to reduce the number of new employees it hires this year as it looks to contain costs.

Prior to today’s plunge, SNAP stock had fallen 52% this year.

What Happened With SNAP Stock

In the memo to staff, Snap CEO Spiegel said:

Today we filed an 8-K, sharing that the macro environment has deteriorated further and faster than we anticipated when we issued our quarterly guidance last month. …We believe it is now likely that we will report revenue and adjusted EBITDA below the low end of the guidance range we provided for this quarter.

Spiegel also said that Snap will slow its hiring. Snap is now likely to hire about 500 new employees by year’s end, down from more than 2,000 employees hired in 2021.

The combined news of the earnings warning and reduced hiring has sent SNAP stock dramatically lower today.

Why It Matters

In April, Snap reported first-quarter earnings that missed Wall Street expectations for both revenue and earnings. At that time, the company said it expected between 20% and 25% year-over-year growth in revenue for Q2. Snap, which operates the popular Snapchat social media platform, forecast adjusted Q2 earnings of between $0 and $50 million.

News that Snap is unlikely to hit its previous forecasts is hurting other social media stocks today, with the share price of Meta Platforms (NASDAQ:FB) down 8%, Twitter’s (NYSE:TWTR) stock off by 4% and Pinterest (NYSE:PINS) stock down 15%. Should Snap’s stock finish trading today down 30% or more, it will be the worst one-day performance for the company since it went public in March 2017.

What’s Next for Snap

Social media stocks are taking hits across the board today on news of Snap’s earnings warning and decelerating growth. The warning has clearly put a scare in already nervous investors who are concerned about slowing growth among tech stocks as interest rates rise to counter high inflation. Snap’s earnings warning seems to have confirmed the worst fears of many investors. How the company regains the confidence of analysts and investors in the current environment is unclear.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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