SNAP’s Startling Warning: The Economy’s Hit a Wall on Inflation

by | May 24, 2022 | Market Outlook

 

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The pain train was back barreling down the tracks Tuesday, and for those who may have missed it late Monday after the closing bell…

Snap Inc. (NYSE: SNAP), the parent company of social media app Snapchat, announced it will miss revenue targets and adjusted earnings for the second quarter. The news sent shares plummeting over 40% in the already beaten-down stock, dragging the entire market down with it on Tuesday — which lends itself to a greater point about the overall health of the economy, but more on that later… 

A snapchat stock chart (Snapchat's revenue target miss)

SNAP is down over 75% the past year and over 60% the past three months alone. 

Sure, Snapchat’s revenue target miss is bad news for the company itself, but did you see what happened to Meta Platforms Inc. (Nasdaq: FB) alongside it? 

Down 10%… 

I made a recent appearance on Cheddar, where I said Meta was not a buy after reporting better-than-expected earnings for the first quarter of 2022… a report I was skeptical of.

“It feels like they’re having a big problem with ad spend headwinds. They’re having a big problem with other social media companies like TikTok eating their lunch,” I said at the time. “They used to have a massive edge in their advertising algorithm, which they no longer have. So that business is under pressure, so much so they changed the name to Meta.

“I’m skeptical and still very bearish on the stock.”

The day I made my appearance, FB was trading at $205… And it was trading at $177 Tuesday afternoon as I wrote this piece — nailed it.

In regard to Snapchat’s revenue target miss, it says something about the greater economy as a whole — and it’s not good.

The Economic Implications of Snapchat’s Revenue Target Miss

So the reason I mention the Meta earnings in regard to Snapchat’s revenue target miss is because I saw something alarming when FB reported, and it was concerning ad spend. 

Revenue was falling off a cliff and at a pace they didn’t see coming.

And then we got the major warning — out of the blue, I might add — from Snapchat on Monday. 

Snapchat said it will miss its targets for revenue and adjusted earnings this quarter, and said it will slow hiring though the end of the year as it looks to manage expenses.

And like I mentioned Monday in regard to the market sell-off… this is not normal.  

Snap reported earnings just last month without guiding lower. Apparently they’ve seen ad spend come to a sharp halt over the past four weeks. It must have been super bad for them to come forward right now and tell the market… 

“Look, we’re not making nearly what everyone thinks we’re going to make and we have to guide down the rest of the year.” 

You don’t see companies guide down a month after earnings — this just isn’t normal. 

And it portends bad news for the market and economy in general. Check out my video above and let’s chat about Snapchat’s revenue target miss and what it means for stocks in the near term, and what you can do about it. 

As always, send any topics you’d like me to cover to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel for all the latest. 

WRITTEN BY<br>Jeff Zananiri

WRITTEN BY
Jeff Zananiri

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