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Poor Leadership Continues to Fail Snap Stock

I want to speculate on Snap stock, but a bumbling management team prevents me from having any confidence in SNAP

By Josh Enomoto, InvestorPlace Contributor

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Four Reasons Why Snap Stock Will Rally in the Near Future

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Simply put, Snap (NYSE:SNAP) and Snap stock are unmitigated disasters. I’ve written extensively about the social-media firm that has apparently turned into a camera company over the past two years. Usually, my tone was extremely negative. However, with SNAP stock price suffering such horrendous losses, I really want to say something positive about it.

The devastating statistics speak for themselves. On a year-to-date basis, SNAP stock price has hemorrhaged nearly 61%. In 2017, the shares plunged 14% from their initial public offering price of $17. Since its peak, the company has lost almost 80% of its equity value. SNAP, along with Blue Apron (NYSE:APRN), is one of the worst IPOs of all time.

But from an extreme contrarian perspective, SNAP stock price is also seemingly providing investors with an opportunity. When the youth-centric company settled into its first horizontal trading range, several analysts recommended buying Snap stock on weakness because, unlike rivals Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR), the Snapchat platform resonated deeply with Generation Z.

My counterargument was that Snapchat’s youthful base was also its liability. Facebook simply appeals to all other age demographics. In other words, Snapchat users eventually “graduate” into Facebook’s more mature, practical network. There’s a reason why for years, job seekers utilized Facebook, not Snapchat, to find their next gig.

However, the ultimate disgrace for Snap stock was losing the battle for young people. Its third- quarter results showed a worrying decline of its core user base. SNAP reported that its daily active users had fallen 1% year-over-year to 186 million, which was slightly below the consensus estimate.

To SNAP’s credit, it has attempted to reinvigorate its platform. Moreover, Snapchat has forged deals with media giants like Comcast (NASDAQ:CMCSA) and CBS (NYSE:CBS). That’s the good news. But its latest announcement suggests that more mediocrity is ahead for Snap stock.

Executive Reboot Likely a Headwind for Snap Stock

On Monday, Snap Inc announced that Twenty-First Century Fox (NASDAQ:FOXA) executive Julie Henderson will become its chief communications officer. While I don’t doubt her credentials, she’s not an appropriate pick for the company on so many levels.

The most obvious disadvantage is Fox’s lack of diversity relative to other networks. If Snapchat discovered the fountain of youth, then Fox is swimming in the fountain of whiteness. This is all the more obvious when you look at the company’s crown jewel, Fox News. Unless different shades of blonde hair are considered diverse, the cable-news giant has virtually no diversity.

Yet that’s not my issue. If you’re hiring a communications officer for a NASCAR-themed folk-dancing party, a Fox executive is perfect. But Snap stock thrives on youth. Generation Z is the most diverse demographic, and a majority of it is not white.

Ironically, with this hiring, Snap Inc automatically created a public relations problem with its core user base.

The other glaring problem with the CCO announcement is Henderson’s relevant successes. She has served in multiple executive communications and corporate strategy roles at Fox. However, what Snap Inc desperately needs is an expert in turning around a sinking ship, not someone who spent her career at an already-established entity.

Interestingly, Henderson started her Fox career as Senior Vice President of Corporate Communications for Fox Interactive Media (FIM) and MySpace. The latter organization represents one of the worst blunders in business history. And FIM’s long-term viability depended on internet assets like MySpace. When News Corporation (NASDAQ:NWSA), which controlled the doomed social-media company, sold it, FIM’s days were numbered.

I’m not suggesting that Henderson was responsible for these failures. But to be fair, neither she nor her team ultimately helped matters. Snap stock is today’s MySpace. Again, the company needs turnaround specialists, not someone merely to fill the ranks.

SNAP Is the Same As Always

I’m a risk-taker at heart. That’s why I’m prone to the adventurous side of the markets, including marijuana stocks, cryptocurrencies or anything with high beta.

Snap stock at this price qualifies as high beta. But the underlying company is also high on boneheaded moves. So despite my penchant for discount-diving, I’m going to take a pass on Snap stock.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2018/12/poor-leadership-continues-to-fail-snap-stock/.

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