When I started writing this post, it was in defense of $SNAP and the overreaction in price that occurred after it failed to meet unrealistic consensus metrics. Since then a few things have changed in the way I value $SNAP.
The first issue I have is with what’s happening in the broader tech sector. The selloff that started on Friday (05/09) has now become global. I don’t see this turning into a major pullback, but it is a time in which those companies with lackluster fundamentals tend to suffer the most. If investors are willing to sell off their well-run, revenue generating FAANGs, then companies like $SNAP, will usually have more exaggerated downsides due to the additional level of risk they carry.
Another worry with $SNAP is that they’ve yet to address the copycat attacks of $FB. I like the way Evan Spiegel calmly reminded us that innovators get copied because such is life. That calmed me for a few weeks because I’m a believer that actions speak louder than words. However, we’ve yet to see any sort of action or confirmation from management that $SNAP is out-innovating $FB. Without that, their slowth in DAU and ARPU will only get worse.
As of Friday, I sold off my small investment in $SNAP because there are so many other opportunities for the risk, and that’s coming from someone that was incredibly bullish on $SNAP. I may be an optimistic investor, however I can only defend $SNAP for so long before the facts slap me out of my daze. At this point, I’d like to see more from management in the way of actual features and improvements to capture more DAU’s. We’ll probably see an increase in ARPU after the ad platform opened up to local advertisers, but I need to be convinced by the numbers before I put money back into $SNAP. So before I delve into analytics and where I think $SNAP is headed, I will wait until Q2 earnings come out and see if management can turn things around.