Earlier this month, Snap Inc (NYSE:SNAP) made its debut on Wall Street to a lot of buzz, especially among millennial investors. While the company’s disappearing message app has been a fast favorite among social media fans, a somewhat confusing company description was released during the Snapchat IPO.
According to management, Snap stock investors are buying shares in a camera company, not a social media or marketing firm.
This should have been somewhat surprising to investors as most people know Snapchat as a social app in which users’ messages disappear after a few seconds.
However, late last year, the firm rolled out a pair of glasses capable of taking short videos and uploading them to Snapchat. It was this product that gave SNAP the ability to frame itself as a ‘camera company’ rather than just another dot-com stock. Still, it remains to be seen whether the spectacles will become popular.
Snapchat: The Next Google Goggles?
You may be thinking that you have deja vu because didn’t another company release video recording glasses? Oh yeah, tech giant Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) did, and they were a flop.
With Snap Inc betting big on its spectacles, it has got to be a concern for SNAP stock investors that Google wasn’t able to pull off a similar product and no one has even attempted such a thing since. It’s worrying, especially considering that Snap wants to be known for the glasses as a camera company.
While video recording glasses are a bold move, Snap Inc.’s spectacles may not meet the same fate as Google Glass did. For one, SNAP’s glasses are much more affordable. Google Glass cost more than $1,000 ,while Snapchat’s are just $130. Another big plus is that Snap is already considered ‘cool’ among millennials.
When Google released Glass, the firm’s own attempt at social media was floundering and the glasses were considered an extension of an already shabby product. In Snap’s case, the glasses may be seen as a way to enhance an already popular user experience.
In recent days, SNAP stock has declined considerably due to concerns about the firm’s sky-high valuation and whether the business has staying power. The success of the glasses will be paramount in giving Snap Inc a boost as the company is up against big names like Facebook Inc (NASDAQ:FB) when it comes to the social media space. However, there is good reason to be skeptical about whether the firm will be able to pull them off.
The Big Problem for SNAP Stock
Whether you believe that SNAP’s spectacles are a good idea, the real issue here is the fact that a well-known media firm suddenly started calling itself a camera company when it came time for its IPO. It’s strange. The company’s prospectus says it wants to reinvent the camera even though what the firm has actually done is reinvent social media.
Snapchat was a huge success because it filled people’s need for a way to share that wasn’t permanent. However, even though SNAP was first, that doesn’t mean it will be best. Facebook has already created similar offerings on its own social media platforms. The social media space is fiercely competitive, so it’s likely that SNAP is looking for ways to differentiate itself.
That kind of thinking is great, but committing to becoming a hardware company when you’ve released just one pair of sunglasses a few months ago feels rushed.
Ultimately, SNAP stock is headed for some pretty serious turbulence over the next few months, so investors would be wise to stay away. The company’s lack of profits coupled with its identity crisis suggest that buying Snap Inc stock now would be a mistake.
As of this writing, Laura Hoy was long FB.
