Oh snap! Social Media Shares Lose Billions After Snapchat Parents Warning

A woman stands in front of the Snap Inc logo on the floor of the New York Stock Exchange (NYSE) in New York City, New York, US, March 2, 2017. REUTERS / Lucas Jackson

May 24 (Reuters) – Snap Inc (SNAP.N) Shares fell more than 40% and launched a sector-wide sell-off on Tuesday after a profit warning from parent company Snapchat signaled tough times in the once-thriving digital advertising industry.

The company was on track to lose $15 billion in market capital, while stocks of major online advertisers and social media companies would collectively lose $200 billion in value from that trajectory.

ID pads (FB.O)Pinterest (PINS.N)Twitter (TWTR.N) The Google Alphabet Alphabet (GOOGL.O) All decreased by between 7% and 24%.

Snap said Monday that it expects to miss the quarterly revenue and earnings target set just one month ago, and will have to slow hiring and cut spending.

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“Snap is an agent of online advertising, and when you see a weakness there, you automatically think of Facebook, Pinterest and Google,” said Dennis Dick, a trader at Bright Trading LLC.

“Once you start thinking about Google, that’s when the markets start selling.”

Tuesday’s sell-off comes days after a survey of Bank of America fund managers indicated that investors are increasingly bearish in technology stocks, a stark reversal of the bullish trend of the past 14 years.

Snap shares are trading at $13.3, less than their 2017 initial public offering price of $17.

Analysts said Snap’s core earnings forecast suggests expenses will outpace its revenue growth, given that headcount rose 52% in the previous quarter.

“There is a lot to deal with in today’s macro environment,” CEO Evan Spiegel said at a tech conference on Monday.

(Additional reporting by Medha Singh and Nivedita Balu in Bengaluru.) Editing by Aditya Soni and Anil de Silva

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