Snap's dismal outlook spotlights one of the hardest hit corners of the S&P 500: social media stocks. And it's getting uglier by the minute.
The 22 U.S.-listed stocks in the Solactive Social Media index, including Snap, sector giant Meta Platforms and tangential player Alphabet, plunged an astounding $1.1 trillion in market value just this year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Putting that into perspective: plunging social media stocks alone account for nearly a tenth of the $9.4 trillion in wealth lost by investors this year so far, says Wilshire Associates.
Just Tuesday alone, Snap shed 43% of its value. The company's value dove 73% this year, or $55 billion in market value, to just $21 billion. Keep in mind this was a social media company worth $75.7 billion coming into the year.
"A rapid recovery in any area driven by advertising and consumer spending is not expected in the near to intermediate term," said Sam Stovall of CFRA on the firm's cut of its rating on the stock to "marketweight" from "overweight." "What's more, increased regulatory risk directed toward the larger information technology companies will also likely add pressure."
Assessing The Social Media Carnage
If you're investing in social media, you're feeling the pain. And it doesn't matter which type of social media you own or even the geography it operates in.
All 22 of the U.S.-listed social media firms have seen their shares drop this year. And not by a little. The average amount lost by the nearly two dozen stocks this year, and several of those are in the S&P 500, is 42% or nearly $50 billion. Additionally, the $200 million-in-assets Global X Social Media ETF, which holds more than 40 stocks, is down nearly 40% this year.
It's not just a U.S. implosion either. China-based social media stocks are plunging just as much, if not more. Shares of Baidu, which ties social media into online search and e-commerce, is down 22% this year. That wipes out $11 billion in market value. And then there's Bilibili, a social media based gaming company. Shares are down nearly 60% this year. And that erased more than $10 billion in market value.
Still, the biggest implosions in social media are in the U.S.
The Bigger They Are?
Given that the U.S. is the birthplace of social media, it's not surprising it's also home to some of the biggest wipeouts.
Meta Platforms' drop this year is a good reminder of why the company might be trying to distance itself from social media. Shares are down more than 45% this year, erasing $443.5 billion in wealth. It's simply not acting like a growth company anymore. Analysts think the company formerly known as Facebook will post a nearly 15% drop in adjusted profit this year.
Problems in social media land, too, are bleeding out to other areas. Alphabet, which has its hand in social media with its YouTube unit, is down nearly 27% this year. Given the company was worth $1.9 trillion coming into the year, it's now down by half-a-trillion dollars this year. Alphabet's profit, too, is seen inching up by less than 1% in 2022. That's a far cry from its growth of past years.
And moderating growth appears to be the issue. Snap, which had been able to tap new growth opportunities amid slowing elsewhere in the sector, is now hitting the wall. It's adjusted profit-per-share is expected to drop by half this year. It's now clear why S&P 500 investors looking for growth are looking to other industries.
Social Media Stock Implosion
U.S.-listed members of Solactive Social Media index lost more than $1.1 trillion in value this year
| Company | Symbol | YTD % ch. | Market value lost ($ billions) |
|---|---|---|---|
| Alphabet | -26.6% | -$522,486 | |
| Meta Platforms | -45.9% | -$443,486 | |
| Snap | -72.7% | -$54,723 | |
| Spotify Technology | -55.7% | -$24,843 | |
| Match Group | -45.4% | -$16,804 | |
| -52.8% | -$12,315 | ||
| Baidu | -22.0% | -$11,684 | |
| Bilibili | -59.6% | -$10,509 | |
| NetEase | -6.4% | -$7,106 | |
| -16.8% | -$7,061 | ||
| IAC/InterActiveCorp | -38.8% | -$4,524 | |
| Fiverr International | -68.2% | -$2,825 | |
| Sprout Social | -55.9% | -$2,719 | |
| -33.5% | -$2,397 | ||
| Angi | -50.4% | -$2,334 | |
| Nextdoor Holdings | -67.7% | -$2,036 | |
| Vimeo | -54.1% | -$1,598 | |
| JOYY | -21.1% | -$1,000 | |
| Bumble | -22.4% | -$972 | |
| HUYA | -48.5% | -$795 | |
| Yelp | -26.2% | -$751 | |
| Groupon | -50.9% | -$344 |
