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Snap (SNAP) Filing Discloses Stake by Hedge Funds, Shares Up

Zacks

Snap Inc SNAP still has support of the institutional investors after the disappointing earnings report last week. Yesterday, per a SEC filing, it has been disclosed that many big hedge funds own a stake in the company. Shares were up 8% in yesterday’s session.

Per media reports, Third Point LLC has bought 2.25 million shares worth $50.7 million, Och-Ziff Capital Management has 1 million shares worth $23.8 million and Appaloosa Management has 100,000 shares worth $2.2 million. Billionaire investor George Soros also has invested in the company by buying 1.7 million shares worth $37.1 million.

The news comes shortly after Snapchat’s announcement of a few new advertising features. Per reports, Snapchat has added new options to help advertisers — “Sponsor World Lenses, Audience Lenses and Smart Geofilters.”

Snap, the parent company of social network, Snapchat, had a brilliant debut. The company’s IPO was oversubscribed multiple times and shares soared 44% on the first day of trading. However, after that, Snap had a tough time keeping the momentum going. The Wall Street is divided in its opinion about the stock, with majority having cautious sentiments.


More recently, the earnings report added to the woes. Although Snap’s first-quarter top- and bottom-line results fared better than the respective Zacks Consensus Estimate, the first-quarter 2017 results clearly depict a slowdown in user base.

Notably, the company added only 5 million active daily users in fourth-quarter 2016, as well as first-quarter 2017, which happens to be the lowest since third-quarter 2014. User growth holds the key to attracting advertisers, which is the primary source of revenues for Snap. A slowdown in user-base growth rate may look unattractive to advertisers.

Plus, the company is yet to make profits. Notably, Snap has lost money since it began operations in 2011.In the last reported quarter, losses from operations ballooned to $2.2 billion from $104 million reported year over year.Snapchat’s nosebleed valuation, despite being a loss-making company, has compelled analysts to remain wary.

Stiff competition from the likes of Alphabet GOOGL and Facebook FB, as well as smaller rivals like Twitter TWTR in the digital ad market, remains an area of major concern.

In fact, Facebook outshines Snap in almost all aspects. The company enjoys a first-mover advantage in the social media space with over 1.9 billion users from every segment of demography. It has a gargantuan base of over 1 billion DAUs compared with 166 million for Snap. Facebook presents a much larger canvas for advertisers than Snapchat. In fact, Facebook’s total addressable market (TAM) has been reported to be 80% bigger than that of Snap.

Interestingly, analysts have related slowdown in user growth for the social media platform to the popularity of Instagram stories, a blatant rip-off of Snapchat’s hallmark feature.

Zacks Rank & Share Price Movement

At present, Snap has a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Since Mar 2, the company’s shares declined 15.28% against the Zacks Internet Software industry’s gain of 8.68%.

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