- Instantaneous (INSTANTANEOUS) earnings disappointed analysts.
- It now calls itself an “augmented reality company”, eschewing the social media label.
- Snap is managing money while waiting for the social media storm to pass. Investors should do the same.
Instantaneous (NASDAQ:INSTANTANEOUS) missed earnings estimates, but the stock was surprisingly resilient.
Stocks have been on a rollercoaster ride, falling before earnings and rising twice after. The shares were expected to open April 25 at $29.25, down about 5%.
The company said it lost $359 million, 22 cents per share, in the March quarter on revenue of $1.06 billion. The loss was worse than the previous year’s $287 million, or 19 cents, but revenue was up 39% year over year.
Snap’s press release highlighted $127 million in positive operating cash flow. He sold nearly $1.5 billion in convertible notes, leaving him with $2.4 billion in cash and cash equivalents at the end of March. Snap also holds $2.6 billion in marketable securities.
Social media struggles and decline
My revenue overview highlighted the differences with Metaplatforms (NASDAQ:Facebook), which destroyed the entire social media complex. Rather than rewrite its software platform, Snap is supplementing it with “Spectacles”, transparent glasses that offer augmented reality functionality. Think Pokemon Go.
Negative views on social media stocks may explain why the board Twitter (NASDAQ:TWTR) now seems happy to leave You’re here (NASDAQ:TSLA) CEO Elon Musk is getting rid of the company. Services that once seemed fun now seem exhausting. Families of teenagers who died by suicide after using apps are suing.
Snapchat responded with new policies aimed at stopping anonymous messaging through third-party apps. Snap says the new policies impact few developers, but some are popular apps like Sendit, which got 3.5 million downloads after other anonymous apps were suspended.
The financial prism
What Wall Street wants to see is money.
Snap is now testing ads in Spotlight, its version of ICT Tac. Some creators have even added “mid-roll” ads, ads placed in the middle of a story rather than at the beginning or end.
Other monetization efforts are fought over privacy concerns. Snap CEO Evan Spiegel now calls Snap “an augmented reality platform,” entirely resisting the social media tag.
Spiegel told his earnings that 2.5 million AR “lenses” have been created, 3D layovers that can be painted onto scenes, directing users to commerce. Supporting this AR push, the company has created an AR certification program, an online studio, and a creator marketplace.
Analysts who are bullish on Snap say these lenses set it apart from other platforms. They liken it to QR codes, which initially met with resistance but have become widely accepted since the start of the pandemic.
An example of what is possible is a virtual fresco waltz disney (NYSE:SAY) and Snap are creating at Disneyland in California. The mural allows visitors to add their own photos or use Disney’s to personalize their view and memories. The custom mural can then be purchased for $16.95.
Focusing on respected advertisers and business partners sounds good, but critics say it makes Snap as spontaneous as a cornflake ad.
SNAP Stock Basics
Analysts haven’t given up on Snap. Tipranks still calls it a strong buy, with 23 of 29 trailing the stock beating the table for it.
But we can live without social networks. I see less traffic on all the platforms I use. There is a growing backlash against the entire online world. This will benefit offline experiences and, less online, walled gardens like games.
While Snap speaks the language of growth, its fundraising moves tell me it’s aware of the backlash.
People have been using social media platforms for over a decade now. And we increasingly saw his dark side. Snap seems more proactive in combating this than its rivals. But turning social media into a mall won’t work either.
If you have a profit on SNAP shares, take it. If you’re looking to buy the dip, don’t.
As of the date of publication, Dana Blankenhorn did not hold any positions at the companies mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.