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Snap CEO warns on earnings, social media stocks dive premarket

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Yahoo Finance Live anchors discuss social media stocks tanking premarket after Snap's CEO warned about earnings.

Video transcript

JULIE HYMAN: In terms of what's setting the tone of that trading, here are the three things that you need to know right now. Shares of Snap are plummeting in the premarket. That's after the social-media company said it's going to miss its own targets for earnings and revenue in the second quarter. Snap CEO Evan Spiegel saying the company will also start to slow hiring in an effort to manage expenses.

The announcement caused broad collateral damage across the tech sector, dragging other social-media stocks down in the premarket. You see Meta, for example, down 8%. Snap itself down 30%. Pinterest is the other where we're seeing a similar magnitude of decline. It is off by 17% this morning.

And, Jared, so this news coming in a couple of different ways. Snap made a filing.

JARED BLIKRE: Right.

JULIE HYMAN: Spiegel commented at a JPMorgan conference, and he also put out a memo to employees where he laid out what's going on for the company.

JARED BLIKRE: Right. And just as we saw some canaries in the coal mine with retail last week-- and we're going to talk about retail again. Walmart and Target just plummeting, plummeting. I think we could see the same thing or maybe the markets are starting to see some canaries in some of these social.

Let's go to the YFi Interactive because I have a pretty compelling heat map. This has yesterday's returns along with the premarket. Let's just go year to date and see what-- well, this is a nasty picture.

So in sympathy, Pinterest itself is down 17%. Alphabet is down 4%. Facebook, 8%. And I do have a comment from RBC Capital Markets saying, "This announcement will sound the alarms on the deteriorating macros evolving effects on digital advertising."

Digital advertising is a huge space, the bread and butter of Alphabet, Facebook, Meta, and, if I'm going to be completely transparent, we too. And, you know, so advertising is one of the first things to get cut, and I'm just a little bit afraid that we could see some continuation on that front.

So we were talking about retail, and let's talk about Best Buy. And--

JULIE HYMAN: Wait, can we talk about Snap for a little bit further here? Because it's interesting that you talk about the "canary in the coal mine" effect because there's actually a pretty big debate among analysts in reaction to those Snap earnings this morning. Some of them saying that Snap, it might be company specific. Some of them saying it's macro. And, I mean, every other note I looked at seemed to have a different opinion on the matter.

Snap itself saying-- Spiegel writing in that memo, "Like many companies, we continue to face rising inflation and interest rates, supply-chain shortages, labor disruptions, platform policy changes, the impact of the war in Ukraine, and more." So all of that is macro stuff, obviously. That's not Snap specific.

But analysts have a little bit of a different opinion here as to what could be potentially going on at Snap in particular. Evercore ISI's Mark Mahaney, for example-- a friend of the show-- talked about that, yes, the macroeconomic factors that Snap cited are relevant for more companies than just Snap, but he also said there are some Snap-specific factors-- its significant exposure in Europe, for example, and that it is more of a brand advertiser than some of its peers.

So if he looks at Meta, for example, it has a big European exposure, and Twitter has a big brand exposure. So there's sort of little nuances here in overall the implications of this Snap news, so that's something to mention.

I think one of the reasons why this caught the markets so off guard is we just heard from Snap last month, right? They already gave the guidance at that point and said they would have 20% to 25% revenue growth. So the fact-- and also gave an indication that in this early quarter that they were already seeing higher revenue growth than that. So it suggests that this slowdown was very sharp and very abrupt.

JARED BLIKRE: Excellent point, and I'll just say Snap is doing what they're supposed to do. They're preguiding. Their setting people's expectations up for what is going to be a bad report.

And now that the damage is being done now, when they announce-- I believe it's on July 21-- they could-- the expectations could come down enough that they don't really suffer for it. The stock could actually jump on the news.

But yeah, there is a slowdown potentially underway. I'd also note in your comments about maybe some idiosyncratic problems with Snap.

JULIE HYMAN: Right.

JARED BLIKRE: And there is evidence of that of people who track their ad program, their ad system, and all that. But if you have nothing more on Snap?

JULIE HYMAN: I have one more thing.

JARED BLIKRE: OK.

JULIE HYMAN: One more thing, which is about the hiring situation because--

JARED BLIKRE: Oh, interesting.

JULIE HYMAN: --we've heard a bunch of companies that are cutting back. Snap is actually not cutting workers. So just to be very precise here, the company is slowing down its hiring plans, but it's not actually cutting people, at least not yet.

So the company says-- as Spiegel said, he plans to hire 500 more people this year after already hiring 900 people already this year.

JARED BLIKRE: Well, we got a similar announcement from Amazon last week, didn't we, that they're slowing their hiring growth?

JULIE HYMAN: Exactly.

JARED BLIKRE: They're not cutting people, as we're going to talk about with some other firms, but slowing is something to watch because those are the majors. Those are the big guys.

JULIE HYMAN: Yeah, well, and if you are pricing a stock for a certain magnitude of growth and now all of a sudden that growth is much, much smaller, that's what we're seeing reflected in the premarket, I guess, with Snap.

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