Snap shares plummet as weak outlook intensifies ad competition fears
Adds graphic, analyst comment in paragraph 7; Updates shares
By Deborah Mary Sophia
Aug 2 (Reuters) -Shares of Snap SNAP.N slumped 22%on Friday, after a dour forecast from the Snapchat parent reinforced Wall Street's worries that the company would continue to cede business to bigger rivals amid intense competition in the advertising space.
The social media firm forecast third-quarter results below market estimates late on Thursday, blaming soft demand from advertisers in consumer discretionary sectors.
"We aren't confident of management's ability to consistently execute over several quarters," Roth MKM analyst Rohit Kulkarni said.
Snap's weak targets further highlight the chasm in the digital advertising market, which is dominated by large platforms such as Meta's META.O Facebook and Instagram, Alphabet's GOOGL.O Google and Bytedance's TikTok, making growth at the likes of Snap and Pinterest PINS.N difficult.
Although Pinterest notably saw strong ad spend in some sectors,including retail and technology, Snap has continued to struggle, flagging weakness in those industries.
Meanwhile, Meta saw healthy advertising demand and delivereda rosy third-quarter sales outlook, while Alphabet's advertising sales jumped 11% benefiting from events such as the Paris Olympics and elections worldwide.
"Everyone is fighting for eyeballs. Rivals including the Big Tech are aggressively stepping up efforts in online advertising. Now you have the likes of Amazon and Netflix looking to flex their muscles, this will make it harder for Snap et al. to drive engagement," said Paolo Pescatore, analyst at PP Foresight.
Snap, which gets nearly all its revenue from advertising, was set tolose more than $4.6 billionin market value, if losses hold.
The stock, however, is known to swing wildly after earnings reports, having surged almost 28% in the prior earnings cycle and slumped more than 34% in the season before that.
"Snapchat has always been that social platform with potential — exciting, but also a burden. And it looks like we're still a bit of ways away from living up to that potential," Bernstein analyst Mark Shmulik said.
Snap shares see volatile 2024 amid stiff competition for ad dollars https://reut.rs/46sQexf
Reporting by Deborah Sophia in Bengaluru; Editing by Krishna Chandra Eluri
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