Updated at 9:36 am EST
Snap Inc. (SNAP) - Get Snap Inc. Class A Report shares plunged lower Tuesday after the messaging app maker warned investors that a 'deteriorating' global economy will hammer the group's near-term profits.
Snap, which makes the Snapchat messaging app, cautioned in a late Monday Securities and Exchange Commission filing that the group is likely to report "revenue and adjusted EBITDA below the low end of our Q2 2022 guidance range".
Snap, which relies on ad spending for the vast majority of its revenues, said that the "macroeconomic environment has deteriorated further and faster than anticipated", causing companies to pull back on ad spending as they reevaluate priorities in a weakening economy.
Social media groups have also cautioned that Apple's (AAPL) - Get Apple Inc. Report Identifier for Advertisers (IDFA) privacy changes, which make it more difficult to track and target users with specific ads, have impacted both user growth and top line revenue gains.
The San Francisco-based group had told investors only last month that ad sales would fall by as much as 25%, even as it forecast solid user growth, thanks to surging inflation, supply chain snarls and Russia's war on Ukraine.
"Since we issued guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than anticipated," Snap said in its SEC filing. "We remain excited about the long-term opportunity to grow our business. Our community continues to grow, and we continue to see strong engagement across Snapchat, and continue to see significant opportunities to grow our average revenue per user over the long term."
Snap shares were marked 37.6% lower in early trading to change hands at $14.03 each. Meta Platforms (FB) - Get Meta Platforms Inc. Report, the parent of Facebook, was marked 8% lower at $180.50 each while Google parent Alphabet (GOOGL) - Get Alphabet Inc. Report slumped 4.6% to $2,127.11 each.
Pinterest (PINS) - Get Pinterest Inc. Class A Report, which posted its first-ever annual profit if February, was marked 19% lower at $1817 each while Twitter (TWTR) - Get Twitter Inc. Report fell 2.7% to $36.85 each.
Snap said last month that it should have between 343 million and 345 million daily active users on its platform in the three months ending in June, firmly ahead of Street forecasts.
For the three months ending in March, Snap said revenues rose 38% from last year to $1.06 billion, largely in-line with Street forecasts, with daily active users of 332 million.
"While we acknowledge that the advertising environment is worsening and we have no clear view that this is the bottom, we view the selloff in shares as an opportunity for long-term investors as Snap is a must-buy platform for advertisers as it reaches 75%+ of 18-34 year-olds in 20+ countries, can continue to take share of video budgets." said JMP Securities analyst Andrew Boone, who carries a 'market outperform' rating with a $45 price target on the stock.