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Snap Stock Tanks 10% for the Second Straight Day

Benjamin Rains

Snapchat’s parent company, Snap Inc. SNAP stock is down 10% on Tuesday for the second day running. Less than a week ago, Evan Spiegel’s company went public and he became a billionaire overnight. Today, Snapchat’s stock closed down 9.80% to $21.44 per share.

Shares of the Venice, California-based disappearing messaging app maker closed up 44% to $24.48 per share after its first day of trading. Snapchat’s stock rose another 11% on Friday, reaching a high of over $29 per share.

The quick two-day jump boosted Snap’s market cap to nearly $33 billion. Snap is down nearly 30% since then, and its market value moved below $25 billion.

But should this early turbulence give investors pause?

The Early Days of Facebook and Twitter

Facebook FB was one of the most highly anticipated IPOs in history. The social media company went public on May 18, 2012, and it opened at roughly $42 per share. Facebook’s stock fell below its opening price right away. By Aug. 2012, its stock had fallen by over 40% to below $20 per share.

But Facebook’s initial fall was due in large part to shares being sold off by people inside Facebook. Since the summer of 2012, Facebook has vaulted to its current stock price of $137.49 per share.

Twitter, Inc. TWTR went public in Nov. 2013. Twitter’s stock closed initially at a similar $40 per share range. By Dec. 2013, Twitter’s stock was priced at $69 per share.

The social media company has not come close to its all-time high again. Twitter stock is currently trading at $15.23 per share.

User Growth

Snapchat closed 2016 with 158 million daily active users, many in the coveted millennial demographic. Snapchat closed 2015 with 107 million daily active users. But user growth has slowed overall, and the company tried to place some of the blame on Android phones.

User growth has slowed the most among millennials. Users ages 24-to-34 grew 74%, but users ages 18-to-25 grew only 24%. Snapchat’s largest user growth came from those over 35. In the fourth quarter of 2016, Snapchat added 33 million U.S. users over 35, up 224% year over year.

Twitter grew its user base from roughly 30 million in the first quarter of 2010 to 288 million by the end of 2014. But user growth slowed in 2014, and it even dipped from the third quarter to the fourth quarter in 2015. Twitter closed 2016 with 317 million active users.

Still, despite the tumultuous election season, Twitter only added two million new daily active users during the fourth quarter of 2016. Facebook added 76 million new users in the fourth quarter of 2016.

Facebook closed the fourth quarter of 2016 with a mind-boggling 1.86 billion active users. Roughly 66% of those users were daily active users, which put Facebook at around 1.23 billion daily active users.

One of Snapchat’s biggest competitors, Instagram, reached 400 million daily active users in the fourth quarter of 2016. The photo-sharing app closed 2016 reaching 600 million monthly users. This massive user base helps Facebook’s Instagram make billions in advertising revenue.

Still, according to a recent Bloomberg report, Snapchat gets nearly 10 billion video views a day. In comparison, Facebook’s last reported video count was 8 billion daily views. But continued user growth will be vital to Snapchat’s success.

For more insight into Snapchat’s IPO, check out Maddy Johnson and Ryan McQueeney on a special edition of the Zacks Friday Finish Line podcast. The two were joined by Renaissance Capital co-founder Kathleen Smith to discuss all things Snapchat.

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