Snap Warns of Disappointing Q2; Fair Value Estimate Lowered to $49, but Shares Still Undervalued

In an 8-K filing on May 23, Snap said it had lowered its second-quarter revenue and adjusted EBITDA forecast, mainly citing the Ukraine war and macro headwinds. While its peers may also feel pressure on revenue growth, we think the effect on Meta and Google’s YouTube is likely less as they remain the top platforms for direct-response advertising, which we expect will be affected less than brand advertising. Twitter’s revenue growth will likely be pressured as the platform continues to attract more broad-based brand campaigns. We do not expect spending on contextual advertising, which IAC’s properties attract, to be affected as much. In addition, during economic slowdowns advertisers prioritize purchasing ad inventory from the likes of Meta’s Facebook and Instagram, TikTok, and YouTube over others in the space, including Snap and Pinterest.