Advertising technology stocks are getting crushed. This includes Google (GOOG), Facebook (FB), The Trade Desk (TTD), Roku (ROKU) and SNAP (down 40% today!).
Why are they falling?
As I discussed last week with Walmart (HERE) and Target (HERE) the U.S. consumer is facing tough choices with higher inflation. As food and energy prices spiral higher there's less spending available on discretionary items.
This means ADVERTISING for discretionary goods takes a hit.
Yesterday SNAP filed the following disclosure announcing that they were cutting their 2Q 2022 guidance:
"Since we issued guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than anticipated. As a result, we believe it is likely that we will report revenue and adjusted EBITDA below the low end of our Q2 2022 guidance range."
This was only 33 days ago!
This suggests the economic environment is worsening RIGHT NOW and that we're facing a broader economic recession. If there's a recession, expect to see declining fundamentals and continued collapsing valuations.
Investors are best to be prepared. I talk about SNAP and steps to prepare for a recession in this video (HERE). My personal takeaways are as follows:
1. In a recession, you'll be amazed how cheap everything can get.
2. Companies are taking steps to get their financials in order, you should do the same.
3. When you buy, make sure there's either a valuation backstop or immense upside potential.
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At the time of this writing, Daniel owned stock in FB, GOOG, TTD, & ROKU.