Never mind Snap. Meta and Alphabet are different stories heading into earnings

Published Fri, Jul 22 20223:06 PM EDTUpdated Fri, Jul 22 20224:21 PM EDT

Kevin Stankiewicz @in/kevinstankiewicz @kevin_stank

Disappointing results from the parent company of Snapchat (SNAP) are weighing on other digital ad stocks Friday, but Club members should be mindful of important differences between companies in the industry. In particular, we're talking about two Club holdings that report quarterly results next week: Meta Platforms (META), which owns Facebook and Instagram, and Google parent Alphabet (GOOGL). Shares of both companies firmly underperformed the S & P 500, with Meta closing down 7.6% and Alphabet finishing lower by 5.6% Snap shares plunged 39%, and a cavalcade of analysts downgrades hit the tape Friday morning. Digital advertising is the main revenue stream for Meta and Alphabet, just as it is for Snap. That doesn't mean the slowdown in advertising spending equally affects those three companies. It's impossible to predict exactly how the quarterly results and guidance from Meta and Google will look next week. But we can recognize the different attributes those two tech titans have compared with Snap, allowing us to contextualize the near-term noise and keep our focus on investing in great companies whose value will increase over the long term. We don't think Club members should head for the exits with the other sellers of Meta and Alphabet. What Snap said Snap warned two months ago its second-quarter results would be rough, and yet sales and earnings numbers still came in below Wall Street's lowered expectations. It's worth noting Snap exceeded forecasts on global daily active users, 347 million versus 344.2 million, according to StreetAccount, but the market isn't paying attention to that. Remember, this is a market that wants actual earnings, not non-financial growth metrics that may one day be monetizable. It is paying attention to Snap's slower-than-expected revenue growth in the second quarter, its lack of third-quarter guidance and plans to "substantially" slow its hiring rate, and all reasons the social media firm said its platform is seeing lower demand from advertisers. Those reasons include increased competition from companies (like TikTok, although management didn't identify it by name) and Apple's iOS privacy change, which went into effect last year. The overall challenging macroeconomi