It's been tough to hold Snap (SNAP +5.71%) stock. Shares have dropped by 30% this year and have crashed by more than 80% over the past five years. The IPO excitement of a new social network is long gone as investors come to terms with low revenue growth, high losses, and intense competition.
Snap stock still isn't a current buy at current levels, and investors shouldn't waste their time looking for an attractive entry point. There are plenty of good opportunities in the stock market, and Snap is a clear laggard.
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Snap is behind Meta Platforms in every way
Snap is in a highly competitive industry, and it's losing badly. Meta Platforms (META +0.15%) looks like the better social media stock in almost every category and continues to grow at a faster rate.
For instance, Meta Platforms closed the third quarter with 3.54 billion daily active users and $51.2 billion in revenue. That comes to $14.46 per daily active user. Meanwhile, Snap closed the quarter with 477 million daily active users and $1.51 billion in revenue, which comes to $3.14 per user. Both companies grew their daily active users by 8% year over year.
NYSE: SNAP
Key Data Points
Snap also posted a much lower revenue growth rate than Meta Platforms and continues to burn through money. It isn't just Facebook and Instagram, either.
Pinterest (PINS +2.44%) brought in $1.05 billion in Q3 with 600 million global monthly active users. Snap only delivered $1.51 billion with 943 million global monthly active users, so it's not making as much revenue per user as other social networks. Pinterest, like Meta Platforms, is also profitable, while Snap continues to incur losses.
Other social networks can just copy Snap
Meta Platforms has a history of copying its competitors. The company introduced Instagram Stories as a direct competitor to Snap and focused on short-form video clips when TikTok became popular.
YouTube and other social media giants have also followed the copycat model. While people have expressed disapproval about social networks copying each other, it works.
Facebook, Instagram, YouTube, and TikTok are larger than Snap, and they can copy anything that Snap does. Snap no longer has a way to stand out because once something works, competitors will copy it.
The copycat model ensures that leaders like Meta Platforms, YouTube, and TikTok will continue to win. Snap is a large social network as well, but it's growing at a slower rate than its largest competitors. Normally, a small social network should grow faster than a giant since it still has a lot of untapped market share to explore.
Snap stock has its occasional dead cat bounces that make it seem like a hidden gem, but the long-term outlook still isn't good. Profitable social media companies like Meta Platforms, YouTube, and Pinterest show what is possible in the industry. Snap is the outlier, but not in a good way.
