(Reuters) – Snap Inc (NYSE:SNAP)’s shares plunged nearly 40% on Tuesday after a profit warning from the Snapchat parent signaled tough times ahead for the once-booming digital ad industry, sparking a sector-wide selloff.
The company was on course to erase more than $14 billion in market value, while Meta Platforms, Pinterest (NYSE:PINS), Twitter (NYSE:TWTR) and Google-parent Alphabet (NASDAQ:GOOGL) were altogether set to lose nearly $140 billion if losses hold.
Snap said on Monday it expected to miss quarterly revenue and profits targets that it set just a month earlier and would have to slow hiring and lower spending.
The bleak view from one of the sector’s most known players underlines how the Russia-Ukraine war, surging inflation and rising interest rates are hobbling social media companies at a time when they had just started recovering the impact of changes to Apple (NASDAQ:AAPL)’s iOS operating system.
“Snap is a proxy for online advertising and when you see weakness there then you automatically think Facebook (NASDAQ:FB), Pinterest and Google,” said Dennis Dick, a trader at Bright Trading LLC in Las Vegas.
“Once you start thinking about Google, that’s when the markets starts to sell off.”
Tuesday’s selloff comes days after a Bank of America (NYSE:BAC) fund managers survey indicated investors are becoming increasingly bearish on tech stocks, a stark reversal to a bullish trend in the past 14 years.
Analysts also said Snap’s outlook for core profit suggested expenses will outpace its revenue growth, given headcount was up 52% in the prior quarter. The company also faces pressure from TikTok and a shift in ad budgets to Google and Facebook, they added.
“There’s a lot to deal with in the macro environment today,” Chief Executive Officer Evan Spiegel said at a tech conference on Monday.
Graphic: Digital advertising stocks this year – https://graphics.reuters.com/DIGITAL%20ADVERTISING-STOCKS/dwpkrnzogvm/Digital%20advertising%20stocks%20this%20year.png cb55bba9-860d-4771-9546-5eaef7b68cf01