In this segment of the Motley Fool Money podcast, host Chris Hill is joined by Fool analysts Jason Moser, Andy Cross, and Ron Gross to consider where Snap (NYSE: SNAP) heads from here. Instant analysis: down. The company behind the social image- and video-sharing app Snapchat delivered first-quarter numbers that missed on revenue and daily active users, among other important metrics.
The Fools consider the numbers, the business model, and their read on the conference call. They also offer their views on whether the shares are a good value yet or if they ever will be.
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A full transcript follows the video.
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This video was recorded on May 4, 2018.
Chris Hill: Bad week for Snap. The social media company's first-quarter report featured a slew of misses on revenue and on daily active users. Shares of Snap down 25% this week. You tell me, Jason, is this the time to buy? Or do you see more --
Jason Moser: No, it's definitely not the time to buy.
Hill: [laughs] Didn't even let me finish!
Moser: Sorry to interrupt you right there, let's not entertain this discussion. [laughs]
Hill: More pain to come? [laughs]
Moser: Yeah, listen. I think the amazing thing about this company is, after laying that egg that they laid this quarter, it's still around a $13 billion company. Mac asked in the production meeting, is it cheap now? And, I think, to your point, to Mac's question, no, it's not. Unprofitable businesses look expensive all the time. That's because we need to try to get an idea of how profitable they can be and when they're going to get there. And I think what we got from this quarter with Snap is, it's not going to be any time soon. And even if it does happen, it's questionable as to whether it will be really meaningful at all.
I've heard you talk before about your appreciation of listening to conference calls because you get the tone of management from them. I get the same thing. And listening to this call, you get the tone of a management team that is clearly in over their heads.
Ron Gross: Yeah.
Moser: I just don't see the path for this company, at least in the near-term. They have an app. They do well with Snapchat, but it's a limited audience there, and it doesn't have the same network effects that something like a Facebook or even a Twitter has. Spectacles will fail spectacularly, OK? I can't believe they doubled down on it. That's going to be another write-off. I think this thing has further to go.
Andy Cross: Yeah. Their daily active users were up 15% year over year, only 2% sequentially. Here's the kicker for me: when they said in the call, "We are planning for our Q2 growth rate to decelerate substantially from Q1 levels."
Gross: Is that a problem? [laughs]
Cross: That doesn't sound really good to me, Chris!
Hill: The thing that had me shaking my head was, I saw different reports of Snap's app update, and different media outlets referring to them as saying, "There were mixed reviews." Well, mixed reviews suggests that there were reviews saying, "This is amazing!" Pretty much every review, and the celebrities that we talked about, said, "This thing is terrible and I'm getting rid of it right now."
Andy Cross has no position in any of the stocks mentioned. Chris Hill has no position in any of the stocks mentioned. Jason Moser owns shares of Twitter. Ron Gross owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook and Twitter. The Motley Fool has a disclosure policy.