Retail Investors Just Learned A Valuable Lesson About Snap Inc

Snap Inc (NYSE:SNAP) was undoubtedly the most anticipated IPO we have seen in some time.  The retail demand  saw following the public offering was unprecedented, creating an interest and demand in the stock market from many who have shown little interest in investing, especially from the millennial and generation Z demographic.

Those retail investors who were drawn to the Snapchat IPO because they simply loved the product just learned a valuable lesson in the stock market following the company’s dismal first earnings report, just because you like a product or business, does not make it a good stock or a viable company.

Dismal Q1 Earnings Report

Snap Inc shares fell over 23 percent following its first quarter earnings report after the close on Wednesday, that saw the company report a loss of $(2.31) per share.  The company had spent a whopping $2.3 billion in the quarter to earn just $149.6 million in revenues.  Despite sell side analysts indicating that Daily Active User growth was the most important metric of the earnings release, the 36 percent YoY growth to 166 million DAUs failed to move the needle for the company.

So far the sell-side has been right all along on Snap, where several firms were not optimistic about the company’s prospects despite seeing a lot of excitement from retail and buy side investors.   Instagram’s copy cat features really have gained a lot of traction and are weighing on Snapchat’s future prospects.  The company is going to have to get more clear about its path to profitability moving forward or we will see the stock take a Twitter-like trajectory in the near-term.

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