Anthony Bartolacci, VP of Financial Institutions at Sensor Tower, joined Closing Bell to discuss the factors dragging down Snap and other social media and tech stocks.

Closing Bell

Snapchat Announces Weak Forecast, Sending Shares Down More Than 40%

Welcome back to Cheddar. News is closing bell. Everyone. Let's take a look at the markets from our place at the new york stock exchange, still a down market across the board. But we do see stocks coming off their worst levels of the session. So the data on 66 points down 2/10 of a percent at the S and p down 1.2% in the NASDAQ lower by worse than 2.5% as technology names continue to take it on the chin following a disappointing warning from snap ceo. So let's get right to that story. A note sent to snap employees from the Ceo Evan Spiegel on monday warning of impending misses on sales and earnings going forward along with the slowdown and hiring At the company. Well that news sending snap shares cratering in today's session, you might think that that is a typo, but no, the stock is down 42% today taking other social media stocks slower and erasing some $180 billion dollars off of the market. It snaps worst day ever and the stock at near its lowest level in several years. Well, joining me now is Anthony Bartolucci, Vice president of financial institutions that market metrics platform, sensor tower, Anthony. Thanks for coming on this show. What were the big factors that stat pointed to his reasons for such a dismal outlook? Yeah, thanks kristen for having me. So, uh, in issuing its warning last night Snapchat cited a few different reasons for the worsening outlook for 2022 they range from macroeconomic factors, things like supply chain issues and inflation to very mobile app specific issues like Apple's IDF a privacy initiative which makes it a little harder for advertisers to target and therefore makes a little bit less revenue per ad placement. And I think there's a bit of a double whammy there on the former issue the macro issues I think with a slowdown in consumer sentiment. Um and and the supply chain issues that that Snapchat cited, they're not citing snap supply chain issues to say, you know, memes are stuck in the courts but rather the type of goods that are being advertised on social networks aren't in the demand that they were maybe six months or 12 months ago. And then on the I. D. F. A. Side I think all the platforms from meta to Snapchat are trying to figure out the best path forward working with their various partners and what the value of those advertisement placements are when they're playing within the rules of the Apple ecosystem and then looking a little bit forward. It wouldn't be surprising if google instituted its own privacy initiative that mirrored what we're seeing on the Apple marketplace of course a staff like any other social media company. It's business based on advertisements. This isn't a subscription model per se Anthony. But what do we know about user growth? How is user growth changing in the U. S. And abroad for snap and what does that tell us about the health of the company? Yeah. So I think once you get past some of these challenges that that are very real. You still have a very strong foundation for the Snapchat application. Looking at sensor tower data in the first quarter we saw 15 to 16% year over year growth and daily active users. And that's actually accelerating a little bit into april. So that's very healthy. And then on the time spent side which I think is really interesting. So sensor tower has a proprietary device panel which allows us to better understand how much time people are spending on mobile applications. And what we saw for Snapchat year over year is that time spent on Snapchat is actually holding steady. And this is an environment where holding steady is a good thing. I think when you have people returning to their regular lives post covid quarantines and regulations you have a lot of time that can be devoted elsewhere outside of your mobile device. So for Snapchat time spent to hang in there, that's really good. And I think it's better than it is for some of the other sort of pandemic darlings that we've seen reports over the last couple of months. It's rare that we see any stock especially a stock like Snapple 42% in a single day. I mean it's still mind boggling to me Anthony clearly as investors take money off the table here when it comes to the stock price. Are you optimistic that this company can turn it around? I mean it's now lost Well more than half of its value just since its latest high. Yeah. And at sensor tower being a data platform, we try to steer clear of appointing on stock prices. But that said, I can say from the underlying fundamentals of the Snapchat app, we are still still seeing, you know, very healthy performance and not just for Snapchat, but across that cohort of social, I think we've seen a lot of positive indicators for instagram. Obviously competitor Tiktok has been doing incredibly well for the last couple of years. So as a category users are spending more and more time here. There's an argument that they're siphoning engagement from streaming video and other platforms that users would be spending large chunks of time, they're spending more time on messaging, They're spending more term time on short term video. I just think this is a transitionary period, especially on the ad side where these companies are trying to figure out how they can better monetize all the users that are on their platform. Okay, so just to be clear Anthony, it sounds like you are still bullish. I know you don't pick stocks for instance, you have a data platform here where you look at data for social media companies, but it sounds like based on what you're telling me that people are still tuning in more and more to social media and economic reopen changes in priorities goals during the pandemic. That doesn't seem per se to be crimping social media growth. Is that the case? That that is correct. Yes. When you look at our metrics across the board they are showing good health, they're showing good user growth. I think the time spent on these platforms is quite enormous. I mean Tiktok 86 minutes a day for the average user um Instagram over 40% of users in April. We're on the application every single day. So not only are these very large user bases at their core but they're very sticky, they're very engaged, they're getting a lot of value and entertainment out of these platforms. So on that side of the house things are are looking very encouraging. I think it's the issues that Snapchat management cited in the warning last night that that are yet to be seen. I think there's the overall macro aspects that are affecting a lot of companies right now. And then there's the mobile app, advertising specific things such as I. D. F. A. Which have to be sorted out. Okay well a 42% drop in a single day. I don't know for snap investors. Hopefully they get sorted out soon, Anthony bottle achieve. Vice president of financial institutions at the market metrics platform, sensor tower Anthony thank you