It is reported that weak user growth and interest rate hike concerns have led to the panic of the US stock social media sector. After snap issued a profit warning on Tuesday, the market value of the sector evaporated more than $135 billion overnight. Snap, which is highly dependent on digital advertising, plunged 43% to close at $12.79, the largest intraday decline since its listing, and even fell below the issue price of $17 at the 2017 IPO.
The massive sell-off led to the evaporation of $16 billion from the company's market value. Other peers, including Facebook's parent company meta platforms, Google's parent company alphabet, twitter and pinterest, also followed suit.
The news also triggered a sell-off in the advertising and advertising technology industry. Larger declines included trade desk (- 19%), fubotv (- 7%), magnet (- 13%), liveramp (- 8%), roku (- 14%) and Vizio holding (- 10%). In addition, Omnicom group fell 8.4% and Interpublic group fell 4.9%.
Tom champion analyst Piper Sandler wrote in the Research Report: "at present, we think it is mainly macro and industrial factors, rather than snap's own problems."
Other analysts on Wall Street also agree with this statement. Ronald Josey, an analyst at Citibank, said: "the weak macro-economy may affect the advertising performance of the wider Internet industry, but I think platforms with large proportion of brand advertising, such as twitter, Google's youtube and pinterest, may suffer greater impact as a whole."
As the parent company of snapchat, a "burn after reading" message application, snap's user growth in April exceeded expectations. But the company said a month later that it could not meet its previous revenue and profit expectations, and analysts also believed that the economic environment was deteriorating rapidly.
Facing the current challenges, snap is competing for advertising budgets with platforms such as Facebook and Google. Spiral inflation is putting pressure on business and consumer spending, and Apple Privacy restrictions also led to growth difficulties for companies that remained prosperous most of the time during the epidemic.
User growth has become another focus of social media companies because they are competing to attract new customers to deliver accurate advertising in an already saturated market. In February this year, meta, the parent company of Facebook, set a record of one-day market value evaporation for American enterprises after disclosing the stagnation of user growth.
Overall concerns about the technology industry also put additional pressure on the social media sector, as the Fed's interest rate hike path has the greatest impact on technology stocks that are highly dependent on future growth expectations.
The Nasdaq 100 index fell 2.2% on Tuesday, erasing Monday's gains. The index has fallen 28% this year, and the market value of growth stocks such as apple and Netflix has shrunk by hundreds of billions of dollars.