Snap, Pinterest fall as Piper Sandler downgrades on concerns over ad market
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Snap (NYSE:SNAP) and Pinterest (NYSE:PINS) fell on Thursday after investment firm Piper Sandler downgraded the two social networks, noting that the outlook for digital advertising spending is start to normalize, after a "strong two-year stretch."
Analyst Thomas Champion noted that multiples for the sector have decline and are down roughly 40% from their highs, but it's likely that multiples won't start to move higher until "ad spend growth bottoms," if history is any guide, something that is not expected to happen in the near-term.
"Numerous macro factors are currently flashing caution, suggesting a measured near-term market growth outlook most appropriate," Champion wrote in a note to clients.
The analyst also lowered his growth forecast for the digital ad market, as he now expects 11% year-over-year growth to occur in 2022 to a total $433B, compared to a prior outlook of 15%. 
Snap (SNAP) shares fell 1.5% to $13.71 in premarket trading, while Pinterest (PINS) declined 2% to $18.54.
Snap: Champion downgraded Snap (SNAP) shares to neutral and cut the price target to $18 from $30, noting the firm is "concerned" about its near-term prospects after the company recently lowered its outlook for second-quarter revenue and EBITDA figures.
"Last week's pre-announcement was indicative of deteriorating conditions," Champion wrote, adding that checks suggest a slowdown in Snap's two largest verticals, media and entertainment and apparel. 
Snap (SNAP) is also being impacted by a "loss of signal" from Apple's (AAPL) iOS changes and a "more challenging competitive environment," citing the continued growth of ByteDance's (BDNCE) TikTok. 
Pinterest: Champion cut the rating on Pinterest (PINS) to neutral, while moving the per-share price target to $23 from $35, pointing out that checks into the health of the company were "mixed" due to a challenged audience growth and lack of new advertising formats.
"Engagement concerns may persist as [Pinterest] competes with more established video-first platforms," Champion wrote, adding that slower spending in apparel and consumer products goods could hurt revenue growth.
Conversely, Google (NASDAQ:GOOG) (GOOGL) continues to be the "star of the show," with the firm believe it may be taking market share, as search advertising looks to be "more resilient" than brand advertising.
Facebook-parent company Meta Platforms (NASDAQ:FB) is performing "slightly better" than it has in recent quarters due to the social network's vast scale and advertising technology. Meta (FB) is still seeing headwinds from Apple's (AAPL) iOS privacy changes, but it has invested a lot of money for workarounds and has remained cautious, lowering expectations.
On Wednesday, investment firm Morgan Stanley cut its estimates for online advertising and e-commerce amid a growing risk of recession.
Analysts have been overly bullish on Snap's stock (SNAP). It had an average rating of Buy from Wall Street analysts, and a less enthusiastic
HOLD from Seeking Alpha authors. Conversely, Seeking Alpha's quant system, which consistently beats the market, rated Snap a SELL.