Snap Back To Reality

Far be it from me to suggest Snap has a better read on the outlook for the economy than Jamie Dimon, but I’ll admit CEO Evan Spiegel’s staff memo, made public as the company slashed revenue and profit guidance, sounded more in touch than Dimon’s somewhat nebulous “strong economy, big storm clouds” characterization, delivered Monday at the bank’s first investor day since the pandemic.

“I’m calling it storm clouds because they’re storm clouds,” Dimon explained. “They may dissipate.” Spiegel, by contrast, suggested the operating environment is worsening in real time. “Today we filed an 8-K, sharing that the macro environment has deteriorated further and faster than we anticipated when we issued our quarterly guidance last month,” he told Snap “team members,” adding that Snap, “like many companies,” is contending with “rising inflation and interest rates, supply chain shortages and labor disruptions, platform policy changes, the impact of the war in Ukraine, and more.”

Stripped of the requisite legal language, the 8-K Spiegel referenced was just a few sentences. “Since we issued guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than anticipated,” it read. “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.”

There was a brief nod to ongoing growth despite the challenges, and Spiegel elaborated in the memo, but the bottom line, figuratively and literally, is that the “big storm clouds” (as Dimon put it) aren’t “dissipating.” Or at least not from the seat where Snap’s sitting, which is apparently less comfortable than it was just four weeks ago. You’re reminded that Snap’s Q2 guidance — the guidance they no longer expect to meet, even on the bottom-end — was short of consensus.

Snap isn’t alone, and that’s the point. You could argue, as at least one CIO did, that this is mostly a story about “new” tech companies and the kinds of pie-in-the-sky expectations investors harbor for growth. But Spiegel’s memo read like the opening page of a half-year review from a Wall Street economics department, not a lament for idiosyncratic developments plaguing social media companies.

As the figure (above) shows, Snap plunged a truly harrowing 43%. Related stocks fell in sympathy.

Dimon got credit for helping bolster market sentiment on Monday. If we’re being honest (and we almost never are), JPMorgan’s investor day was news because nothing else was. On Tuesday, we came back to reality. Ironically, the reality check came from a company best known for superimposing rainbow tongues and dog ears on users during video calls.