Snap boss Evan Spiegel is clear on the ills of his company. So much so that the day he presented the results he explained them to his staff. The pessimism that shines through his message, together with the disappointment of the figures communicated to the market, has caused the collapse of the company’s shares, which have lost 40% of their value in a few moments and have fallen below the price of their IPO. Its collapse has also infected other social networks and technological values and, with it, the market as a whole.
The company has gone from being worth 37,000 million dollars (about 35,000 million euros) to about 22,000 million dollars. Snap had a sweet moment during the pandemic, when people confined to his house were looking to entertain themselves and communicate and used his app much more intensely. Now, he is not able to maintain that pace and has to deal with a whole series of problems.
“Like many businesses, we continue to grapple with rising inflation and interest rates, supply chain issues and labor disruptions, platform policy changes, the impact of the war in Ukraine and other problems”, indicates Spiegel in the message revealed by Bloomberg.
“The macroeconomic environment has deteriorated faster and faster than we had anticipated when we gave our quarterly forecasts last month,” it continues. “Our revenues … are growing more slowly than we expected,” he explains, adding that they are likely to stay below the lower bound they had been running in their forecast range. The head of Snap asks for responsibility with the expense and announces that the hiring of personnel will stop.
The results presented by the company they leave signals in different directions. On the one hand, revenues grow strongly, 38% in the first quarter, to exceed the barrier of 1,000 million dollars (1,062.7 million, exactly). On the other, losses also grow, 25%, to 359.6 million. But what worries investors and analysts the most is that cash generation has been reduced. That, and that the second quarter looks much worse than the first.
He knows in depth all the sides of the coin.
According to the new forecasts, the pace of revenue growth will slow down to 20%-25%. And gross operating profit, which reached $64 million in the first quarter, will now be between $0 million and $50 million, according to the company.
The lowering of Snap’s forecasts has affected the price of companies in its sector. Meta (the parent company of Facebook), Alphabet (the Google group), Twitter and Pinterest were among those who suffered sharp falls on the stock market. And the weight of these companies has dragged down the market as a whole, also affected by the negative signal sent by the Abercrombie & Fitch accounts, added to the poor results of other retail firms.