SNAP closed on Tuesday at $32.07. It opened on Wednesday at $26, having fallen by 20% in overnight trading in sympathy, apparently, with FB. It traded down pretty steadily on high volume to $24.50-ish during the day. That’s another 5% decline (arguably peanuts in comparison with what other stocks are doing). It reported its own earnings after the close. They were good. The stock is trading at $36.50, up by 49% on extremely high volume, as I’m writing this.
If we go back a little farther, SNAP opened 2022 at about $47, having declined from an all-time high of $83 last September.
All in all, ex today, not a pretty picture.
Also, to be clear, I have no real idea about what’s going on with SNAP or with other stocks that are being battered this week. Black Monday in 1987 is the only time I can think of when prices moved so violently. And the economic backdrop back then was truly dire vs. not so bad today.
This all may just be AI run amok.
Having said that, what this also feels like to me is short sellers trying to trigger a final capitulation so they can close out positions. Yes, SNAP is not a particularly heavily short sold stock. But the bet against may be done with derivatives.
I’m not a FB fan. I don’t know the company that well. I do use Facebook, especially Messenger, and Instagram, though. My overall take is that Mark Zuckerberg is the spiritual successor to Rupert Murdoch. But while Murdoch’s strategy was to gain political influence by riling up the right, Zuckerberg’s is to rile up any side he can. As we can see from Murdoch, Wall Street assigns a relatively low multiple to earnings achieved this way.
What I find most notable about FB this week is the obvious: its earnings report triggered a 25% decline in the stock price, on massive volume. In other words, the results seem to have been a complete shock.
–where were the analysts covering the company? How did they miss stuff that was bad enough to take a quarter out of the stock price once it was reported?
–where was the company? At the very latest, as the quarter progressed, FB must have known that estimates were too high and that tried to reshape the Wall Street narrative away from the faster-than-analysts-thought maturing of the existing businesses to the idea that FB is on top of the situation and that cash flow is being reinvested into high-potential metaverse opportunities. Yes, stock weakness might have come earlier, but chances are the ultimate outcome would have been considerably better than how things played out by ignoring the investment community.