Matt Britton and other analysts react to Snap's first earnings report and 23-25% stock drop. Instagram Stories hit 200 million users versus Snapchat's 166 million, raising questions about whether Facebook's competition or Snap's own monetization struggles drove the decline.
Welcome back. A big story and Snap this afternoon the shares are down more than 23% after their first ever earnings report. The trading around $17.65. Right now let's get some reaction. We have a full cast and crew here to talk about this. Ryan Payne is here from Payne Capital Management. He's a little bit more bearish on Snap. Shawn Staples here from Navy Capital is a little bit more bullish and that Britain of crowd tapped to explain how you use this thing still. But thank you for being with us. So let me start, Sean, with you and the prospects that you see for Snap here and how much of a disappoint disappointment you think today is.
I think this is an example of where sentiment just didn't match the reality. You had the syndicate sell side firms coming out basically telegraphing this quarter on every single metric ARPU users revenue and the reality is the street expectations were just too high. I think nothing here is new. There's nothing to change average revenue per user.
But you said, you made it sound like they knew what the numbers were going to be, but actually they, they didn't, they were too high.
So though the banks that were on this deal were spot on. If you look at their numbers came in exact exactly where and everybody else.
Didn'T come down to meet them.
Everyone else was above for some reason is.
But that's not a big deal, that's recoverable. Is there a fundamental problem here that they didn't post higher revenue, for example?
I don't think this is fundamental. I think this is technical and sentimental. And that's why I think you're seeing the reaction here is people were positioned for a much higher expectation.
Okay, Ryan, what, what would you say to that?
I totally disagree of your spectrum. I think the problem is Facebook is eating their lunch. You know, Instagram has this new Stories model which has already since August, 200 million active daily users. Whereas I think came in at 166 million active users for Snapchat. So it just goes to show you they're already on it. And I'll just say anecdotally, most of my colleagues are millennials and they're seeing less and less people on Snapchat. A lot of people migrating over to Stories.
Matt, are you picking up on that shift as well?
I mean I've been picking up for a very long time. I mean I think the reality of Snapchat, there's a numbers. Is the story behind the numbers. Story behind the numbers is that Snapchat is a point solution for the young Demographic they use to one ephemeral messaging. Once people's parents and grandparents got onto Facebook, they jumped on Snapchat because they didn't want to text things that would come back to haunt them. Then Snapchat launched Stories, which is their one to many approach. But in some ways that was actually copying Instagram and Facebook which had a one to many feed approach. Instagram tweet them out a little bit, added a story. The other thing Snapchat was Discover, which is a publishing media channel. Young people don't want to go to Snapchat for that. It's a point solution and I don't. I think that's where the biggest misalignment.
Is like as we're talking the shares are now down 25% and by now.
It'S worth mentioning that the IPO itself priced at 17.
Yeah, that's right.
So basically you've gotten rid of all the aftermarket gain. And I do think the question, you know, to your point is is there, is there a second act if we're not just going to have advertisers say look I don't know why this works but let me just throw money because that's the young demographic we can't otherwise reach. If that's not going on, what is the company?
So there needs to be a second act because in the one to one messaging it's not a native format to place advertisements in. People don't want advertisements in the middle of their text messages. Is there a second act is going have to come to an acquisition much Facebook acquired Instagram or Google acquired YouTube.
What's the cool?
Well, I mean there's augmented reality, there's mobile there, there's you know, artificial intelligence. There are things out there. The spectacles, it's a play but I think it's more of a novelty right now. It's not going to drive mainstream revenue growth.
It's a one trick pony, right? And at this valuation, it's just so overvalued right now that who's going to want to buy it at this level, you know, over $20 billion today and they're loser bleeding money, let's face it.
So I'm going to push back here and say when we get the new iPhone and 3D sensing all of their tricks are coming out of the bag, you're going to start seeing the aug augmented reality. You're going to start seeing much more interactive and inactive.
But what, what is Snapchat going to offer on that front that Facebook who just did a whole developers Conference about.
This won't look, you've seen some wins out of Snapchat. You saw the geofilter pattern win and you've seen, and I point people to see imagine.com an acquisition they made a little over a year ago, where you can actually bridge the inanimate and the adamant. And we're going to start seeing more of that on the ad side in filters and in other pictures.
So the shares are just above their IPO price, about $17. Where do you think this company should be?
Look, I think at this price, it's definitely worth getting your toe in if you're not there. And I think historically you've seen on most of the Large hot tech IPOs similar day one performance on earnings, and most have done very well.
What's your price target for the shares?
I think from here we go back to the mid-20s pretty soon.
And so then I'll let Matt weigh in on that. If they, if Snap is able to come out with something that's a little bit more exciting and allows you to kind of play with augmented reality and so forth. Does that, does that do it?
Does that. That's an experimental marketing it. Most traditional Fortune 500 marketers are still wiggling the way that broadcast television to go into digital. For them to go to digital augmented reality. We're talking five, 10 years out. There's no ROI. There's a proven model there. And the programmatic model of being able to target Joe's Pizza, everyone within a mile of that that Facebook and Google have, that's really where the magic is. And the magic is also in that all the brand marketers use Google. All the brand marketers now use Facebook. Personally, I don't think anybody at this table from just asking anybody here uses Snapchat. Right? Most marketers don't. And that's the biggest issue with so many people that are calling this.
Forget the live partnerships, too. They have the NBC Universal investment. We haven't seen anything from that yet. They have 40 discovered partners. They haven't done a great job of monetizing that yet. But we're going to start seeing the live content. NBC, espn, Vice. It's coming.
We got to go. So Ryan will give you the last word.
I would just say, you know, I would say from the stock, the bubble is going to burst. It's not if it's when there's great opportunities globally to invest your money with much lower valuations.
All right, thank you, everybody. Ryan Payne, Sean Siegel, Matt Britton on a very much battleground stock, especially after these earnings. Really appreciate it.
