Snap shares plummet 22% as weak outlook intensifies ad competition fears
Shares of Snap slumped 22% on Friday, after a dour forecast from the Snapchat parent reinforced Wall Street's worries that the company would continue to cede business to bigger rivals amid intense competition in the advertising space.
The social media firm forecast third-quarter results below market estimates late on Thursday, blaming soft demand from advertisers in consumer discretionary sectors.
«We aren't confident of management's ability to consistently execute over several quarters,» Roth MKM analyst Rohit Kulkarni said.
Snap's weak targets further highlight the chasm in the digital advertising market, which is dominated by large platforms such as Meta's Facebook and Instagram, Alphabet's Google and Bytedance's TikTok, making growth at the likes of Snap and Pinterest difficult.
Although Pinterest notably saw strong ad spend in some sectors, including retail and technology, Snap has continued to struggle, flagging weakness in those industries.
Meanwhile, Meta saw healthy advertising demand and delivered a rosy third-quarter sales outlook, while Alphabet's advertising sales jumped 11% benefiting from events such as the Paris Olympics and elections worldwide.
«Everyone is fighting for eyeballs. Rivals including the Big Tech are aggressively stepping up efforts in online advertising. Now you have the likes of Amazon and Netflix looking to flex their muscles, this will make it harder for Snap et al. to drive engagement,» said Paolo Pescatore, analyst at PP Foresight.
Snap, which gets nearly all its revenue
