Snap Tanks Ad-Tech Stocks Again
It’s becoming an annoying routine now whenever quarterly earnings roll around. Social media platform Snap (NYSE:SNAP) is always the first to report its earnings and each time the company disappoints, other ad-tech stocks see an immediate sell off. On Thursday, Snap reported its earnings for the second quarter and needless to say, it was a major disappointment. Shares of SNAP fell by nearly 40% on Friday, as the company fell below the $10 price level and saw its market cap shrink to $16 billion.
Not surprisingly, Snap missed on both the top and bottom line for the quarter. But that’s not the part that made the stock sell-off. If you remember, Snap already warned Wall Street in May that this quarter’s earnings would be bad. Despite these updated projections, Snap still missed estimates. The company also said it would be slowing down its hiring and also approving a $500 million stock buyback.
Snap’s quarter was bad but was it this bad? Once again investors immediately attributed this to a decline in ad revenues which led to a sell-off for stocks like Pinterest (NASDAQ:PINS), The Trade Desk (NASDAQ:TTD), Alphabet (NASDAQ:GOOGL), and Meta Platforms (NASDAQ:META).
Ignore Snap, Buy the Dip on Ad-Tech
Ad-tech stocks all fell sharply on Friday, leading to a broader market decline and an end to the NASDAQ’s brief three-day winning streak. It’s something that happens far too often and in my opinion, it’s something you need to ignore.
To compare Snap to a company like Alphabet or Meta Platforms is embarrassing. These companies are free cash flow machines on a much larger scale than Snap. For the second quarter, Snap reported global daily active users of 347 million. Instagram has about 1.4 billion daily active users, or four times what Snap has. This isn’t even including Facebook, Whatsapp, and Oculus VR.
Snap is admittedly struggling and no doubt apps like Tik Tok and Instagram Reels are causing problems for the company. Can Snap ever ‘snap’ out of it? The platform recently released a Snapchat+ subscription model that costs users $3.99 per month which gives them access to early updates and shows them who has viewed their snaps.
My point isn’t exactly bearish on Snap (although I am). It’s more of a bullish stance on companies like Meta Platforms and Alphabet, and to a lesser extent the Trade Desk. Ever since Apple’s privacy feature came in, ad-tech companies have struggled with iPhone users. Next week Alphabet and Meta Platforms report their earnings and I wish I could tell investors to buy the regular dip that takes place after Snap’s report. How can we take advantage of this? Ad-tech related stocks have fallen like clockwork alongside Snap. When stocks like META or GOOGL fall by 5% or more in a day, because of another company’s earnings, it represents a strong buying opportunity. So the bottom line is that if Snap falls again next quarter, buy the corresponding dip on ad-tech related stocks.