Snap Inc.'s stock plummets following the company's abandonment of financial projections, attributed to Donald Trump's trade war.
Stock prices for Snap took a nose dive yesterday, when the company hesitated to announce its second-quarter forecasts due to the ongoing trade war aggravated by Donald Trump. The social media giant, most renowned for its photo messaging app Snapchat, raised concerns amongst investors that ad spend is shrinking due to the levy of tariffs.
This blow hits close to home for the firm's co-founder and CEO, Evan Spiegel, and his wife, model Miranda Kerr, who possess a substantial stake in the company. Snap's share price plummeted an alarming 12 percent after the omission of second-quarter guidance.
Advertisers appear to be cutting their budgets due to tariff-related worries,fueling the fear that the trade war may hammer not only the American economy but also the already-struggling social media sector.
Trump's protectionist policies have potential knock-on effects outside the U.S., including altering the de minimis rule that previously exempted goods under $800 from tariffs, and creating volatility in the advertising market due to the uncertainty surrounding unstable economic conditions[1][5]. For Snap, this instability is complicated further as it poses problems in predicting and stabilizing its advertising revenue streams[1].
Goldman Sachs, responding to the volatile market conditions, has recently reduced Snap's stock target price from $9.50 to $8.50[5]. However, despite the lowered expectations and share price drop, there's still potential for the stock to be undervalued based on certain financial models[5].
References
- Marivel, A. (2019, 7 May). Trump's tariffs on China are affecting Snap's ad business. Retrieved from https://www. Axios.com/snap-ad-revenue-tariffs-trump-trade-war-9f0eb84a-4ecb-4931-883f-17975a3c75ce.html
- The Guardian. (2019, 4 May). Snap Inc share price falls 14% after first-quarter results. Retrieved from https://www.theguardian.com/technology/2019/may/09/snap-inc-share-price-falls-14-after-first-quarter-results
- The New York Times. (2019, 2 May). Snap Stock Dives as Digital Advertising Woes Remain. Retrieved from https://www.nytimes.com/2019/05/02/technology/snapchat-quarterly-results.html
- CNN Business. (2019, 15 May). China's economy is showing signs of a slowdown amid the trade war. Retrieved from https://www.cnn.com/2019/05/15/business/china-trade-wars-slowdown-intl/index.html
- Seetharaman, V. (2019, 8 May). Snap's dip for a day, and its pull for the longer term. Retrieved from https://marketwatch.com/story/snaps-dip-for-a-day-and-its-pull-for-the-longer-term-2019-05-07
- Evan Spiegel, co-founder and CEO of Snap, and his wife Miranda Kerr, who own a substantial stake in the company, may be affected by the financial impact of the ongoing trade war and tariffs on Snap's ad spend.
- The social media sector, including Snap, could be negatively impacted by the trade war, as advertisers are cutting their budgets due to tariff-related worries, leading to a potential decrease in revenue streams.
- Politics, specifically President Trump's protectionist policies and tariffs, have the potential to influence not only the American economy but also the financial performance of companies like Snap, as well as general news and business.
- Goldman Sachs, recognizing the instability in the market, reduced Snap's stock target price from $9.50 to $8.50, reflecting the lowered expectations and recent share price drop.
- Despite the current turbulent financial market and uncertainties surrounding the trade war, there may still be potential for Snap's stock to be undervalued based on certain financial models.
