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Snap says economy deteriorated fast, slashes forecast, stock plummets
Global Banking & Finance Review®
Company
By Sheila Dang
(Reuters) -Snap Inc said the economy had worsened faster than expected in the last month and the social media company slashed its quarterly forecast, triggering an after-hours sell-off.
Since late April, “the macroeconomic environment has deteriorated further and faster than anticipated. As a result, we believe it is likely that we will report revenue and adjusted EBITDA below the low end of our Q2 2022 guidance range,” the company said in a U.S. securities filing.
Shares of Snap fell 31%, Alphabet dropped 3.6% and Amazon dropped 2.2%. Nasdaq futures also fell, with traders blaming Snap.
U.S. stocks had ended higher on Monday, led by gains from banks and tech, but the rise follows Wall Street’s longest streak of weekly declines since the dotcom bust more than 20 years ago and many investors remain on edge.
Snap Chief Executive Evan Spiegel told employees in a memo seen by Reuters that the company will slow hiring for this year and laid out a broad slate of problems.
“Like many companies, we continue to face rising inflation and interest rates, supply chain shortages and labor disruptions, platform policy changes, the impact of the war in Ukraine, and more,” he wrote.
Last month, Snap forecast second-quarter revenue growth of 20% to 25% over the previous year.
The news follows statements by companies including Uber Technologies Inc and Facebook-owner Meta Platforms Inc earlier this month that they would rein in costs and hiring.
In the memo, Spiegel said Snap would evaluate the rest of this year’s budget and “leaders have been asked to review spending to find additional cost savings.”
Some planned hiring will be pushed into next year, though the company still expects to hire more than 500 people by the end of this year, he said.
(Reporting by Sheila Dang in Dallas; Editing by Richard Chang, Peter Henderson and Kim Coghill)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured as an annual percentage increase.
A stock market is a collection of markets where stocks (shares of ownership in businesses) are bought and sold. It serves as a platform for companies to raise capital and for investors to trade shares.
An economic crisis is a severe disruption in the economy characterized by a sudden decline in economic activity, often leading to high unemployment, reduced consumer confidence, and financial instability.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the principal amount. They are influenced by central bank policies and economic conditions.
Financial stability refers to a condition where the financial system operates effectively, allowing for the smooth functioning of markets, institutions, and the economy without excessive volatility.
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