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Snap Sinks To New Low, Then Soars: Here's Why

Shares of Snap SNAP fell to a new all-time intraday low again on Monday morning, only to see the company’s stock price pop later.

Snap posted disappointing quarterly earnings last Thursday that fell short of our Zacks Consensus Estimates for both revenue and earnings. The stock dipped in after-hours trading on Thursday and fell on Friday as well.

Today, in a move that has become all too common of an occurrence for Snapchat’s parent company, Snap stock touched a new all-time low of $11.28 a share. However, after the dip, shares of Snap climbed over 6% in early afternoon trading.

What exactly is going on with the struggling social media company that might cause its shares to fluctuate so much?

Massive Movement

Monday marked a second big expiration date for Snap insiders to begin to sell their stock. JPMorgan JPM analyst Doug Anmuth estimated that as many as 782 million shares of Snap became available today. The analyst also noted that even more shares could begin to trade hands after the 180-day lock-up period expires at the end of the month.

Over 73 million shares of the social media company have been moved through afternoon trading—Snap’s average volume is just under 21 million.

Some Investors Run, Others Stay

Singapore-based Temasek Holdings dumped its entire stake in Snap, according to a Friday regulatory filing. Snap's seventh-largest shareholder, Fidelity Investments, sold half of its total stake in Evan Spiegel’s company.

Yet T. Rowe Price TROW, which is Snap's fifth-largest shareholder, increased its Snap stake to 37.8 million total shares, up from 28.3 million in the second quarter, according to a Monday filing. Snap's sixth-largest shareholder, Coatue Management LLC, and BlackRock Inc. BLK both added to their Snap positions last quarter.

News broke on Friday that Dan Loeb, a billionaire hedge fund manager and his firm Third Point LLC sold all of its 2.25 million Snap shares, worth an estimated $50.7 million, according to regulatory filings.

Third Point added 500,000 shares of Facebook FB in the quarter to push the firm’s position to roughly 3.5 million total shares, worth around $528 million. The Snap stock dump and the subsequent jump into the company’s chief rival can’t be good news for the disappearing photo and video app company’s investors.

User Growth

Snap announced that daily active Snapchat users grew to 173 million, up from 166 million at the end of the first quarter. But the company fell short of Wall Street user projections. On top of that, Facebook-owned Instagram and its Stories feature, a copy of Snapchat’s tool with the same name, boasts 250 million daily active users.

Snapchat’s user growth has been solid in the U.S., but international user additions have proved to be much harder to come by. Snap has experienced trouble with its Android app, which is a problem as the operating system is very popular outside of the U.S.

Bottom Line

The company’s stock price has slowly declined since going public earlier this year. Snap is currently a Zacks Rank #4 (Sell) and scored an “F” grade for Value in our Style Scores system.

Some big investors dumped the faltering social media company, while others added to their positions. On a day like today, it is hard to pin down what direction Snap’s stock price is headed. But, if Snapchat’s user growth doesn’t kick into a higher gear amid all of the news that constantly surrounds the disappearing content app, everything else might prove to be white noise.

Want to know more about Snap and another young, struggling company? Read: Blue Apron vs. Snap: Which IPO Has Been Worse So Far?

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