When Snap took itself public earlier this year, it was the hot new kid on the block that Millennial users wanted to sink their early earnings into as soon as it became possible. Facebook has loomed over it like a giant trying to squash it like a cockroach under its feet, and investors quickly began to question whether Snap is nimble enough to avoid Facebook forever. But there’s good news. Snap and Facebook are nothing alike, or so analysts are trying to convince us. The reality is that it’s all in your perception.
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Snap and Facebook moving in opposite directions
Analysts have been rather quiet on Snap recently as Wall Street watched as insiders got their chance to unload millions of shares for the first time since the initial public offering. Snap rallied in mid-August, going on a run that saw its shares climb in the double-digit percentages. Alas through, that run is over, and Snap is back on a downward trend after topping off around $15 a share, not even managing to reach its IPO price.
The big problem Snap has faced is user growth, an issue that Facebook hasn’t really had during its life as a public company and one that has basically sunk Twitter. Twitter should be thankful for Snap though because it has taken the place as Wall Street’s punching bag in the social media industry.
Wedbush analyst Michael Pachter initiated coverage of Snap with a Neutral rating and $12 price target on Wednesday, and one of the biggest issues he focused on was the decelerating user growth trends. He noted that daily net user adds peaked in the second quarter of last year at 21 million, spread equally around the globe. By the fourth quarter, net adds plunged to 5 million but then recovered this year to 8 million and 7 million for the two completed quarters.
Snap and Facebook battle for mind share
Pachter also noted that Snap is up against “a slew of much larger competitors,” as Facebook’s user base added 1.3 billion daily users and 2 billion monthly users. Snap’s user base of 173 million is dwarfed even by Twitter, which has 328 million monthly users. Facebook’s Instagram alone had more than 700 million users, while Facebook Messenger and WhatsApp each had more than 1.2 billion monthly users.
