Snap Inc (NYSE:SNAP) stock has been up and down a lot since its initial public offering just a couple months ago. After soaring in its first few days of trading to north of $28, SNAP stock tumbled all the way to below $20 in just two weeks. Another couple of weeks later, shares fought their way back to $24 … before falling back below $20 again in less than a month.
Now the stock is steadily climbing and sits around $22 as we approach Snap’s first earnings report as a publicly traded company, due Wednesday after the bell.
The takeaway from these volatile moves? SNAP stock is a lot of speculation, and little else.
However, that speculation will find some grounding after the market closes tonight and Snap gives the market some concrete numbers. But I think investors should be prepared for sobering news that could send shares spiraling toward fresh all-time lows.
Instagram Is Stealing the Show From Snapchat
I have pointed out before that Facebook Inc (NASDAQ:FB) is stealing SNAP’s thunder, and that trend has only accelerated in the past several weeks and months.
In particular, investors should look at Instagram. The photo-sharing social media app has been on fire ever since it rolled out the Stories feature in August. Less than a year after launching, Instagram Stories now has 200 million daily active users. That is nearly 25% more than the 161 million daily actives Snapchat reported at the end of the 2016.
And it’s not just Instagram. Facebook’s international focused messaging app, WhatsApp, launched the Status feature in February. In just a few months, WhatsApp Status has 175 million daily active users. That is nearly 10% more than Snapchat.
I am going to reiterate that because I think it’s that important: In less than a year, Instagram Stories already has 25% more users than Snapchat, and in just a few months, WhatsApp Status already has 10% more users than Snapchat.
At a deeper level, these new features for Instagram and WhatsApp are creating tailwinds for user growth. Instagram just recently crossed the 700 million monthly active user threshold, and that means the platform is adding an unprecedented 25 million new users per month. By comparison, Twitter Inc (NYSE:TWTR) has added about 25 million new users over the past two years.
The copycat game is working really well for Facebook, and that leaves Snap somewhat up a creek without a paddle — evidenced by the fact that SNAP stock typically quakes every time Facebook rolls out a similar feature. With user growth stalling, what unique value proposition does the Snapchat platform offer to advertisers that Instagram doesn’t? Instagram is Millennial-focused. Instagram has far more users.
Advertisers are indeed noticing this. Instagram has 1 million advertisers on its platform, and that milestone was crossed after the launch of Stories.
I don’t think that big push to above a million advertisers coming after the launch of Stories is a coincidence, and I think that will show in Snap’s numbers on Wednesday.
If you hold shares … well, look out below.
Bottom Line on SNAP Stock
It is no secret that Snap Inc. is richly valued, and that makes the stock extremely at risk to any operational hiccups.
So far, the market has been speculating wildly about the future of SNAP stock based on Facebook’s copy-cat moves. Investors will finally get some concrete evidence of what that all means on Wednesday.
Given the momentum Facebook and particularly Instagram have built over the past several months, Snap’s results will almost assuredly disappoint an overly bullish investor base.
As of this writing, Luke Lango was long FB.
