Sales of social media ads in the US have fallen since last year due to inflation. Additionally, as ad spend is expected to slow next year, we think social media stocks Twitter (TWTR) and Snap (SNAP) can now be avoided. Read more….
Social media ad sales in the US took a hit last year, growing 36% to $58 billion. Since then, however, sales have cooled down as high inflation has created an environment where brands tend to spend less on advertising. Moreover, ad spend fell 12.7% year-over-year in Julywith the worst monthly decline since the same month in 2020.
Ad spend for 2023 is expected to slow significantly to just 2.6%. In addition, Apple Inc.’s (AAPL) It is predicted that privacy measures on social media companies that rely on cross-site tracking in the region of a hit of $40 billion in their profits during this and the coming year.
Twitter, Inc. (TWTR)
TWTR works as a popular platform for public self-expression and conversation in real time. The company’s primary product is Twitter, a platform that allows users to consume, create, distribute and discover content.
On July 8, TWTR announced its plan to take legal action to enforce its previously announced agreement to acquire Twitter affiliates from Elon Musk for $54.20 per share in cash. TWTR had filed its preliminary proxy statement with the U.S. Securities and Exchange Commission to be acquired by subsidiaries of Elon Musk. This reflects an uncertain picture for the company ahead.
TWTR’s total costs and expenses increased 31.1% year-over-year to $1.52 billion in the second fiscal quarter ended June 30. Revenue was down 1.2% from last year’s quarter to $1.18 billion. The income from operations was down 1,236.3% from a year ago to a negative $343.76 million. The company’s net earnings per share declined 537.5% year-over-year to a negative $0.35.
Analysts expect TWTR’s EPS estimate for the fourth fiscal quarter ending December to fall 25.2% year-over-year to $0.25. The consensus revenue estimate is expected to be $1.61 billion for the same quarter.
The stock is down 40.3% over the past year and 10.6% so far to close out its latest trading session at $38.63.
This bleak outlook is reflected in TWTRs POWR ratings. The stock has an overall D rating, which corresponds to a sale in our own rating system. The POWR Ratings rate stocks on 118 different factors, each with its own weighting.
TWTR is rated with an F for Sentiment and a D for Momentum and Stability. It ranks number 44 out of 65 stocks in the F-rated internet industry.
In addition to the POWR Rating figures that we have mentioned above, one can see the growth, value and quality of TWTR ratings here.
Snap Inc. (SNAP)
SNAP operates internationally as a camera company. The company offers Snapchat, a camera application with various functionalities that allows people to communicate visually through short videos and images.
In the second quarter ended June 30, SNAP’s total costs and expenses increased 28.7% year-over-year to $1.51 billion. Adjusted EBITDA was down 93.9% year-over-year to $7.19 million. Non-GAAP net income came in at a negative $29.60 million, indicating a 120.5% decline from a year ago value.
Street expects SNAP’s annualized earnings per share to fall 51.8% to $0.11 for the fourth fiscal quarter ending December. The consensus revenue estimate is expected to be $1.34 billion for the period.
The stock is down 85.1% over the past year, closing its last trading session at $11.22. SNAP is down 76.1% since the beginning of the year.
The stock has an overall F rating, which equates to strong sales in our proprietary POWR Ratings system. SNAP is rated an F for stability and a D for growth, momentum, sentiment and quality. It ranks number 59 in the same industry.
In addition to the POWR Rating figures mentioned above, SNAP’s valuation for Value can be seen here.
TWTR shares were up $0.80 (+2.07%) in after-hours trading on Tuesday. Year-to-date, the TWTR is down -10.57%, compared to a -17.12% increase in the benchmark S&P 500 index over the same period.
About the author: Kritika Sarmaho
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She received her bachelor’s degree in commerce and is currently enrolled in the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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