3 Reasons Snap Inc (SNAP) Stock Might Crack After Earnings

The X-factor is whether Facebook's aggressive moves have affected Snap's user base

     

Issue No.3 for Snap Inc: User Base

This is perhaps the most important factor for SNAP stock. Unfortunately, the trend is not encouraging. The user growth rate went from a mere 7% in Q3 to only 3.2% by the following quarter.

Granted, the Snap S-1 pointed out that there were technical issues, such as with the Android app. Yet this may ultimately be mostly spin. Let’s face it, Zuckerberg has been focused on punishing Snapchat. A big part of this has been copying favorite features of the Snap app. While this may seem unfair, it appears to be working quite well.

Just look at Instagram, which has undergone an extensive transformation, with the key part of this being the Stories feature. In less than a year, it has attracted a whopping 200 million daily active users. Snapchat, on the other hand, has 162 million.

In a nod to this, here’s what Zuckerbeg had to say during his earnings report: “I think we were a little bit late to the trend initially around making cameras the center of how sharing works. But I do think at this point we’re pretty much ahead in terms of the technology that we’re building, and making an open platform I think is a big step forward. A lot of people are using these products across our family of apps. And I would expect us to continue leading the way forward on this from this point on.”

So if there is further weakness in the user base for the company in the quarter, there could be pain for SNAP stock.

Tom Taulli runs the InvestorPlace blog IPO Playbook as well as OptionExercise.com, which provides interactive tools & services for employee stock options of pre/post IPO companiesFollow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


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