Club holdings Meta Platforms (FB) and Alphabet (GOOGL) — the parent companies of Facebook and Google, respectively — fell Tuesday after Snap cratered on a profit warning. The owner of Snapchat said late Monday that it will miss its revenue and adjusted earnings targets for the current quarter. All three companies rely heavily on digital advertising spending. We took advantage of Tuesday’s dip in Meta and bought 50 more shares on the belief the stock’s sell-off based on Snap’s warning was overdone. We didn’t buy any more Alphabet, but we do have the stock rated as 1, meaning we consider it a good buy at current levels. Whether you buy or hold, don’t join the parade of sellers who are dumping Meta or Alphabet. The stocks dropped about 8% and 6%, respectively, during Tuesday’s session, in an already tough year for these stocks. What’s happening Snap ‘s (SNAP) negative update Monday night obviously caught Wall Street’s attention, with shares plunging 40% and pacing for their worst-day ever. Advertising is a cyclical business tied to the strength of the economy. Investors were already wary that the economy may be slowing down and corporations could see lower-than-expected profits as a result. The earnings reports from Target (TGT) and Club name Walmart (WMT) last week put their concerns front and center. Then came Snap’s pre-announcement. In a securities filing, Snap said the “macroeconomic environment has deteriorated further and faster than anticipated,” which in practice means advertisers are spending less on Snap’s platform and its revenue forecast from just over a month ago is going to be wrong. Competitive dynamics could have played into Snap’s shortfall as well, namely from TikTok. Implications for FB, GOOGL Meta gets most of its revenue from digital advertising on Facebook and Instagram, and so does Alphabet through Google Search and YouTube. That’s why investors in those stocks care about what Snap has to say. The question right now, essentially, is whether those two companies will experience the deterioration from the “macroeconomic environment” — to borrow Snap’s phrasing — in similar magnitude to Snap. Morgan Stanley analysts wrote Tuesday that they expect “all online ad platforms to feel some impact of a significant consumer pullback.” But it’s reasonable to believe that since Meta and Alphabet’s platforms are higher up on the advertising ladder than Snap, they may be affected to a lesser extent. A possible scenario could see clients continuing their spending on, say, Instagram and Google Search while trimming buys in other channels. Analysts at KeyBanc Capital Markets offered a similar view in a note to clients Monday night. Here’s what they wrote: Given Snap is a low-single-digit percentage of industry ad revenue, we view the 2Q guidance update as a cautionary flag but not one to sound the alarm on the entire sector. … We believe GOOGL and FB likely face lower risk to revenue and margins. Both companies are core to direct response advertising (i.e., last ad budgets to cut) and are disciplined with opex reductions (FB is already doing this) and buybacks. Between the two, we see more incremental risk to GOOGL margins as revenue mix shifts to lower margin, high investment areas (e.g., Cloud). Goldman Sachs analysts also noted Monday night that Snap’s results and management commentary “has historically been more volatile in nature compared to large cap names (such as FB and GOOGL) given their scale, level of platform maturity & size of its advertiser base (SNAP being exposed to a narrower set of advertisers.” On a more basic level, Meta and Alphabet are just different companies than Snap. Meta and Alphabet are profitable. They return capital to shareholders through sizable buyback programs; Alphabet just announced a $70 billion share repurchase program last month. Those are the kinds of companies we want to be shareholders of in this difficult market. Snap, by contrast, does not return capital to shareholders and generally loses money every quarter. In its fourth quarter of 2021, the company’s net income was surprisingly positive for the first time since the company went public in March of 2017. But then in the first quarter of 2022, net income was back in the red. Meta and Alphabet trade at reasonable price-to-earnings ratios. On the other hand, investors have to value Snap on a price-to-sales basis, and those are the types of stocks to avoid in this environment. The Club has been preaching that since last year. Ad CEO’s thoughts In an interview Tuesday on CNBC, Mark Douglas, CEO of ad-tech firm MNTN, offered his industry perspective what Snap’s situation means for rivals. (MNTN owns actor Ryan Reynolds’ Maximum Effort creative agency.) “There’s two types of advertising. There’s brand advertising and there’s performance advertising, and so Snap, literally, their business is almost 50-50. I think if you dissected the numbers, where they’re probably seeing all the weakness is brand advertising. That’s the first thing that any CFO is going to cut when they want to cut expenses, so I think it’s definitely a near-term problem for Snap. But I think if you look at Google, it’s exactly the opposite. The vast majority of business is performance. I think Google is going to do just fine, and Facebook is somewhere in the middle. … If you look at Google and Facebook, they have just millions of advertisers and those companies are not just going to pack up shop. … I’m not usually that bullish on Google. But I think Google is just a standout here. Nothing to worry about in the near term, and then for everyone else it’s going to be a little bit rough, especially if you’re dependent on brand advertising. Bottom line Put it all together, we would advise some nibbling or just holding steady with Meta and Alphabet, given their current valuations of 15.5 and 18.5 times forward earnings, respectively, and their historic growth rates. Yes, there’s some potential near-term macro weakness ahead and more pain in the market. But we have a longer time horizon than the next quarter alone. Snap’s announcement alone doesn’t change our belief that we can ride it out with these formidable tech giants and come out the better when the storm clears on Wall Street. (Jim Cramer’s Charitable Trust is long FB and GOOGL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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