October 4, 2022
Snap's Reduced Profit Forecast Sends Stock Plummeting 30%. What Tech Giant Is Next?

Snap stock tumbled right over the cliff Monday evening, and the reason for the plummet makes it quite likely that Snap won’t be the last tech company to see its shares go so spectacularly splat over the next few months.

Less than three weeks after issuing guidance for the second quarter, Snap is now revising those figures, saying it expects both sales and profit to fall short of initial estimates. It blames the situation on a “macroeconomic environment [that] has deteriorated further and faster than anticipated,” the company says in a new SEC filing.

Investors, already shaken by weeks of decline in equities, rushed to dump the stock in after-hours trading. Snap fell more than 30% to around $15.80, a grim mark for the shares. At such a price, it means the company has given up nearly all the gains it won through the pandemic, a time when users turned to apps like Snapchat to pass the time, lifting the fortunes of companies like Snap and other competitors.

There are two narratives apparent in the stock’s Wile E. Coyote imitation, and let’s talk about them separately. There’s the macro one, which is arguably the most important. Snap isn’t the only company relying on digital-advertising dollars to fill its bank accounts—far from it, of course. Everything from Alphabet to Meta does too. Snap’s warning about revenue and profit should be viewed for what it most obviously is: an indicator those companies will struggle in the second quarter, and we’ll get a look at just how bad it is for them when they report their second-quarter figures in July and August. That indicator alarm is glow neon red after Snap’s statement, the same shade as, well, an illuminated exit sign.

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