In this MarketFoolery segment, host Chris Hill, Million Dollar Portfolio's Jason Moser, and Stock Advisor Canada's Taylor Muckerman consider how the market is treating much-maligned social media upstart Snap Inc. (NYSE:SNAP), which has stumbled hard since its IPO. A major lockup period ended Monday, allowing insiders to take some money off the table. It would be no surprise if supply and demand sent the stock lower, but that didn't happen, and these Fools have some thoughts about why. They also discuss where the company is headed in the long term and why nobody should be comparing it to Facebook (NASDAQ:FB) -- yet.

A full transcript follows the video.

This video was recorded on July 31, 2017.

Chris Hill: So I'm not sure what the headline on this next story is, but it probably falls under the umbrella of "not nearly as terrible as I thought it was going to be," which is that today is the day that the lockup period for Snap insiders expires. So Snap went public recently. Big IPO right out of the gate in terms of tech industry IPOs. The stock has gone down from there, obviously. 

Taylor Muckerman: Forty-three percent or so. [laughs] 

Hill: But who's counting? And July 31 was the day that insiders could actually sell their shares. There was an expectation among many -- and I will include myself in that group -- who thought this is going to be another bad day for Snap. And the stock is basically flat right now, although you look at the volume of trading, and in a typical day, about 14 million shares of Snap will be traded. It is almost 12 noon as we are taping right now, so we're not even halfway through the trading day, and already more than 26 million shares have traded hands. I'm surprised by this. What about you, Jason?

Jason Moser: I'm not, honestly. The main reason why is, it's no secret. We knew this was coming. Today is the unlocking of, I think, 400 million shares or so. There's another big slug of shares coming up in the middle of August that will become available to sell as well. So at the end of the day, economics rule and supply and demand do whatever they're going to do. But I think the main thing here is that it wasn't a secret. We all knew this was coming. So I do think there was something priced into this in advance. Yeah, you could see it either way. Would I have been surprised if the stock was down 10%? No. Would I have been surprised if it was up 10%? Probably so. That it's flat doesn't really tell me one thing or another.

I think the questions all still remain with Snap. The big question, at least, is, if the market is going to judge you first and foremost in this space on the number of users that you have, then Snap has its work cut out for it. I think they know that, too. That's going to be something that a lot of people are paying attention to. This is something that is part and parcel of being a public company. You have lockup expirations that come into play. In a month, we won't be talking about it. We'll be talking more about the latest quarter that they announced, and the fundamentals of the business. But what happens today, it's neither here nor there, I guess. 

Muckerman: I wonder what would happen if the stock was up 40%.

Moser: Yeah, that would be surprising.

Muckerman: Since the IPO, maybe they're trying to recoup some of their losses by holding on for a little longer.

Hill: That's the thing for me. It's not a surprise to me that insiders are selling their shares. The fact that there's apparently an equal number of people on the other side of the equation saying, "Yeah, we feel like this is worth our dollars." And maybe psychology is part of it, because if you're buying shares of Snap today, one of the things going through your head is, "I'm not buying at the IPO price. I'm getting it at a discount to the IPO price."

Moser: True. On Twitter today, a buddy of mine, one of the guys over at 106.7 The Fan -- you guys know, maybe, Drab T-Shirt, Matt Cahill -- was asking me this very question. He said, "Jason, my best friend is all in on Snap and wants the Drabber to join him." And that's where I have to look at that and say, "Listen, I'm not going to tell you whether to buy or sell, but here are some thoughts that I have on the matter." Again, focusing on users, understanding that growth in that regard with Snapchat is certainly slowing down, based on the most recent numbers we saw. He asked, "Couldn't the same be said for Twitter?" I said, yeah, they could say that. That's the point, really, to be able to look at things that happened in the past and maybe learn some lessons from them so that we can look at some of these opportunities in the future and see how we should be judging them. 

I think with Snap, all sorts of reasons to be concerned. There's going to be a very long time until they're profitable. I'm not convinced that it's a platform for the masses. I think if they want to grow into this valuation that they have today -- which, even at today's price, and even if you take into account full-year revenue expectations, the stock is still somewhere in the neighborhood of 16, 17 times sales, which is a very premium multiple to Facebook, ZillowTripAdvisor, Twitter, all those companies. There's a lot of optimism still baked into this stock today, and until I see that little Snap ghost everywhere where I see the Facebook and Instagram and Twitter logos, then I don't see how this works. They're going to have to figure out a way to become something more, and this goal of being a camera company, I don't know, is necessarily the right play, unless it's a corner that no one else can see around except for Evan Spiegel. Maybe that's the case; I don't know. I guess time will tell how visionary he really is. But as it stands right now, I've read of some concern there at Snap headquarters about this lockup expiration and future lockup expirations and really where this company is headed.

Hill: Well, that was one of the nuggets buried in Facebook's earnings report last week that I found interesting. Instagram has 15 million business accounts. The other thing is, you invoked Facebook, but not in the way that some in the financial media have, which is coming into this lockup period, there were some analysts out there who were saying, "You heard these same concerns when Facebook's lockup period expired after their initial public offering. And if you had bought then ... " And that's where I just want to say, please stop doing that.

Muckerman: That's a tough comparison. [laughs] 

Hill: Yeah. And to your point about the revenue, Facebook was actually making money hand over fist. They were serious questions, particularly around mobile advertising. Those questions have been answered in spades by Facebook, but come on!

Moser: The comparisons to Facebook are lazy. There's no other way to put it. Facebook has far more users; it's far more relevant. We said this on Motley Fool Money this past week. If you're an advertiser, you're an idiot for not advertising on Facebook. You have to, just because of the number of eyeballs that the garner on the Facebook platform and Instagram and all the properties that they have with all of those users. It's not to say Snap can't be successful. It very well may be. But they're in a position right now where they basically have no room for error. And even then, they have a long way to go until they're even profitable. And so rather than judge the stock and the company on a very short-term-style event, like a lockup expiration, let's try to focus more on the fundamentals of the business. We'll learn a lot more here in the beginning of August, when they announce their quarterly results. And I think we're all looking forward to learning more about the business and seeing where they want to take it. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.