Medha and Nivedita Singh

(Reuters) – Snap Inc (NYSE:) Shares plunged over 40% on Tuesday, prompting a selloff across the sector. The sale was triggered by a profit warning issued by Snapchat Parent. This warned of trouble ahead for once-blended digital advertising industry.

It was expected that the company would lose $15 billion of its market capitalization. Meanwhile, shares in major social media and online advertising firms could lose $200 billion.

Snap shares ended at $12.79, a lower price than the 2017 IPO of $17

Meta Platforms and Twitter, Pinterest (NYSE) and Alphabet (NASDAQ) were down between 5% – 24%.

Snap announced Monday that Snap expects to miss its quarterly profit and revenue targets. Snap also stated it would need to slow down hiring and reduce spending.

According to Brian Wieser of GroupM, global head of business intelligence and global president for social media, valuations for stocks in social media are falling after companies experienced unprecedented growth when advertisers recovered from the pandemic.

Snap and other platforms had overestimated their capacity to maintain high growth rates, he stated.

Snap’s estimated 2024 earnings before interest tax depreciation, amortization and taxes was nearly 15x higher than Alphabet’s 8.5x and Meta’s six times, respectively, Refinitiv data shows.

One of the most prominent names in the sector sees the negative impact of Ukraine’s war and surging inflation on social media companies as they try to recover from the damage caused by Apple’s iOS operating systems.

Dennis Dick of Bright Trading LLC stated that Snap is an online proxy and when there’s weakness, you immediately think Facebook (NASDAQ:), Pinterest, and Google.”

The market starts to move once you think about Google.

Snap, Meta, and other Snap peers are caught in a storm, Jasmine Enberg (principal analyst, research firm Insider Intelligence) said.

The selloff on Tuesday comes just days after a Bank of America survey of fund managers indicated that investors have become increasingly bearish about tech stocks. This is a dramatic reversal of a bullish trend over the last 14 years.

Snap analysts believe that core profits will be lower than revenue growth because of the fact that Snap headcount increased 52% during the quarter.

Evan Spiegel, chief executive officer of the company, stated that there is a lot in today’s macro environment. He spoke at a conference about tech Monday. cb55bba9-860d-4771-9546-5eaef7b68cf01