Is Snap's Disastrous Day A Bad Sign For Digital Advertising?

Is Snap’s Disastrous Day A Bad Sign For Digital Advertising?

Snap Inc has sent shockwaves across the digital advertising industry following a dire warning about the current state of the market.

It’s been an up-and-down earnings season, with more downs than ups, unfortunately. We’ve seen poor outlooks send stock prices spiraling regardless of earnings or revenue beats, and we’ve seen individual companies drag down entire industries — we’re looking at you Target and Walmart.

But that was just the tip of the iceberg. Things had yet to really ‘Snap’.

Tough times for digital advertising

Social media platform Snap Inc. (NYSE: SNAP) posted Q1 earnings last month and it really didn’t paint the worst picture of the quarter just gone. Earnings and revenue barely missed analyst expectations, with figures of -$0.02 per share and $1.06 billion just missing respective marks of -$0.01 per share and $1.07 billion.

The real problems arose following revisions to the company’s outlook for the year, however. CEO Evan Spiegel warned his employees of the challenges ahead, stating that:

“The macro-environment has deteriorated further and faster than we anticipated when we issued our quarterly guidance last month.”

This news sent Snap plummeting, with over 43% of its value evaporating in its worst single day of trading ever. Not only did Snap capitulate, but other companies reliant on digital advertising were dragged down too, with Pinterest, Roku, and Meta all suffering significant losses.

The digital advertising landscape is ever-changing and companies are still playing catch-up,trying to figure out the best practice for a new era of online ads. This has been made all the more difficult with fears surrounding inflation swirling and supply chain issues still rampant across the globe.

Snap’s disastrous day is certainly not to be ignored, but overreactions are becoming all too commonplace on Wall Street lately. While this is certainly far from good news, perhaps it’s not as devastating to the entire industry as yesterday’s price moves might have you believe.

Remember, always assess the underlying thesis of the stocks you hold. Only when that has changed should you consider any major decisions.

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