Snap's Warning Has Implications For These 6 Stocks

Zinger Key Points
  • Snap's second-quarter warning has a more serious read-across for Twitter and Pinterest
  • Pinterest is more exposed to sectors susceptible to high inflation and Twitter could take a hit due to the noise surrounding buyout deal
  • Facebook and Google are the ones likely to be least impacted

Snap set early alarm bells ringing for social media companies with its warning concerning second-quarter performance.

An analyst at KeyBanc Capital Markets sees a read-across for these six companies.

Google & Facebook: Alphabet, Inc. GOOGLGOOG and Meta Platforms, Inc. FB are likely to face lower risk to revenue and margins, analyst Justin Patterson said. These companies are more reliant on direct response ads, which would be the last to face the axe, the analyst added.

Both are also disciplined with their operating expenditure reductions and buybacks, the analyst noted.

The analyst sees more incremental risks to Google's margins, as its revenue shifts to low-margin, high-investment areas such as Cloud.

Related Link: Expect More Snap-Like Warnings From Tech Firms Ahead, Says Munster

Roku & Trade Desk: Patterson sees relatively higher risks for Roku, Inc. ROKU and The Trade Desk, Inc. TTD.

Trade Desk issued a late report on May 9 and provided upbeat commentary, and Roku boasts of gains with advertisers, the analyst noted. Ad budget wins, connected TV growth and political spend will likely offset macro pressure for these two companies, he added.

The two platforms, the analyst noted, are fairly diversified. Trade Desk also benefits from retail media spend, which is scaling this year, he added.

Related Link: How Does Google Make Money

Pinterest & Twitter: Patterson sees the most near-term risks for Pinterest, Inc. PINS and Twitter, Inc. TWTR.

Pinterest has "noticeably high" exposure to retail and consumer product areas that face pressure from inflation, the analyst said.

"For TWTR, we are cautious that M&A may act as a distraction and exacerbate brand advertising spend headwinds," Patterson said.

Snap Price Target Cut: Reacting to Snap's warning, Patterson reduced his price target for Snap stock from $45 to $27, but maintained the Overweight rating.

Snap plunged 30.97% to $15.51 in after-hours trading Monday, according to Benzinga Pro data.

Posted In: Justin PattersonKeyBanc Capital MarketsAnalyst ColorPrice TargetReiterationAnalyst RatingsTech