There's this delusion or complacency when it comes to Snap. Even as the facts are ringing so loudly, analysts are asleep at the wheel here. At some point, things may improve, but over the coming 12 months, that's not going to happen.Īlong these lines, last month I declared:Īnd as you can see below, analysts continue to be cheerleaders of this stock. The days of Snap, as a hypergrowth company, are now gone. There are several crucial considerations to keep in mind.Īs Snap downwards revises its revenue estimates we get further evidence that Snap will not be returning to 40% CAGR any time soon. Snap's revenue growth rates, **author's estimate I explained in that article, why I had turned bearish on Snap:Īlong these lines, I believe that this stock remains a sell.Īuthor's work Snap's Revenue Growth Rates Move Lower More than 30 days ago I made a bearish call where I explained why I rated this stock a sell. Snap ( NYSE: SNAP) updates the market between quarters that it's going to miss the low end of its own guidance. Phynart Studio/E+ via Getty Images Investment Thesis The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines. On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. Until bigger names like Facebook and Google report user growth, SNAP stock is not a buy. The social media advertising industry is in the early phases of a slowdown. SNAP only appears to have better value from here because its share price is relatively lower. When that happens, Snapchat’s earnings prospects will improve. SNAP investors should look for clues that corporations will resume advertising spending. Technology stocks already dropped to reset stock valuations lower. The Federal Reserve plans to increase rates by 50 basis points in June and in July. Although experts are speculating that inflation has peaked, interest rates are still rising. Investors need to look at the inflationary environment monthly. SNAP’s warning forces savvy investors to think deeper. Markets priced in the weak prospects but they have yet to account for further disappointments. Investors seeking value in SNAP stock should think twice. SNAP is among the social networking companies whose revenues may fall as a result. Yet if consumers prioritize their spending on essential goods amid higher inflation, companies have lower profits.Ĭompanies may cut their operating costs to sustain positive margins, which often means cutting advertising budgets. Real Macroeconomic PressuresĬompanies have higher input costs that they are passing on to consumers. SNAP has yet to prove that its “Shared Stories” will help reverse the user-base decline. Instagram Reels tried to mimic TikTok, too. Those videos are less than a minute, much like TikTok videos. They can only copy their competitor, hoping that users will stay on their platform instead of defecting. Social networking companies have few strategic options to win back users. He shares his stock picks so readers get actionable insight to achieve strong investment returns. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. Chris Lau is a contributing author for and numerous other financial sites.
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