Can Snap Inc. Snap Back?

Dec. 14, 2017 8:39 AM ETSnap Inc. (SNAP)EXPE, META, BKNG42 Comments
John Engle profile picture
John Engle


  • SNAP’s first year as a public company has not gone well.
  • Heavy short interest, market pessimism, and fears of competitors have darkened the picture.
  • There have been some positive notes, including a vote of confidence from Tencent Holdings, app redesign, and integration of more advertising streams.
  • Despite gettingbeaten down in 2017, SNAP has little prospect of being the phoenix of 2018.

Snap Inc. (NYSE:SNAP) has had a rough debut year on the public market. From the outset, an immature leadership team seemed unprepared for the rigors of quarterly performance reviews and the unrelenting scrutiny of stock analysts.

CEO Evan Spiegel has oscillated between apparent naivete and frustration at having to answer to shareholders and market sentiment. That has been a problem in the face of unrelenting criticism that has emerged since the company’s IPO.

Worse still has been the persistent financial underperformance and strategic miscalculations. The result has been a mounting short interest and intensely negative sentiment in the market.

Yet some analysts and investors feel the doom and gloom is overdone. Can SNAP snap back from the brink and deliver a turnaround story in 2018? Let’s see if we can find out.

The Boons of Low Expectations?

SNAP has repeatedly missed on earnings estimates, even as analysts’ predictions became more muted. Q3 2017 was no different, showing stagnant growth and a major overestimation of demand for its Spectacles glasses product.

The Spectacles debacle alone cost the company $40 million. User numbers were up just 3% and there was a 60% drop in advertising rates. Overall, it was not a pretty picture.

In the wake of the third quarter earnings bloodbath in November, in which shares fell as much as 22% in after-hours trading, SNAP promised a redesign of the app that would increase users and revenues.

With short interest so high and the market expecting only more of the same, any positive change could be seen as a comparative win. A well executed strategy of expectations management could see the stock turn around – or at least give it more of a floor from the bottomless pit it has been sliding into of late. Down 35% from its IPO price, some contrarians are starting to see an

This article was written by

John Engle profile picture
Investment professional specializing in deep value opportunities, growth plays, special situations (long + short) across a range of asset classes and industries.Current Role(s): President, Almington Capital Merchant Bankers; Chief Investment Officer, The Cannabis Capital Group.Asset Classes: publicly traded securities (stocks + fixed income), private equity, real estate, venture capital, cannabis, fintech. MA, Trinity College Dublin (economics + philosophy); Diploma (finance), London School of Economics & Political Science; MBA, University of Oxford.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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