The company behind the popular photo app Snapchat has shocked investors with forecasts for the current quarter: the stock initially fell by about 31 percent. It is likely that the targets for turnover and operating profit will be missed, operating company Snap said on Monday. Since the forecast a month ago, the economic environment has deteriorated further – and faster than expected.
Snap relies on advertisers being willing to spend money on different types of advertising products on the platform. In times of economic uncertainty, they often become more reserved.
Rapid deterioration of the business
Snap already took a cautious tone in April after things were slowed down in the first quarter by, among other things, the Russian war of aggression in Ukraine. The warning now reveals a rapid deterioration of things.
At the start of the year, Snap was so strong that it still recorded a 38 percent increase in revenue in the first quarter — although many advertisers had temporarily halted their campaigns after the Russian invasion. Snap forecast only 20 to 25 percent growth for the current quarter, as the company already expected headwinds from inflation concerns, among other things. But even this expectation is likely to be missed.
Co-founder and boss Evan Spiegel now wants to save. In an email to employees, he announced fewer new hires, the tech blog “The Verge” reports. Managers should also monitor their areas for potential cost savings.
Hope for the future Augmented Reality
Snapchat was best known for images that disappear on their own, but is now also a platform for shopping and media content. In particular, Snap relies on what is known as augmented reality (AR). The technology integrates digital content on the screen with the real environment. Snapchat lets consumers try out shoes or cosmetics virtually – and charges the company for it.
Investors quickly become nervous about Snap stocks. They cut the price by a quarter last fall after the company was hit harder than expected by Apple’s tightened data protection rules on the iPhone. Even though the first quarter profit was followed by a counter-movement at the end of the year: a year ago the share was still above $ 60, now only $ 15.51 in after-hours trading.
Investors also suspected a tragedy for other ad-dependent tech companies, given Snap’s woes. Facebook shares fell about seven percent in after-hours trading and shares of Google’s parent company, Alphabet, fell more than three percent.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
