Analyst: Snap's Lockup Could Be A 'Bottoming Event' For The Stock, Not A 'Negative Event'

Snap IncSNAPtraded in positive territory on Monday as investors reacted, clearly nervous over the stock's lockup expiration. But investors who are looking at the expiration as a negative event may be wrong in their thinking, at least according to Canaccord Genuity's Michael Graham. A lockup period more often than not represents a "bottoming event" for stocks, rather than a "negative event," Graham said during CNBC's "Squawk Alley" segment. Granted, there has been a lot of negative sentiment heading into the lockup expiration and this sentiment is likely to stretch out until the company's earnings report in two weeks. tipranks.png (11.75 KB)

"The more important thing for Snap is to show some execution when they report next Thursday," the analyst said. "The two most important fundamentals are user growth and revenue."

Snap did "somewhat disappoint" the Street in its first ever earnings report in terms of user metrics, and the stock could bounce back if management delivers strong numbers. The problem is that as a social media company, Snap will be reporting similar metrics to what Facebook Inc FB reports.

But Snap's woes are even bigger when considering that when Facebook was a mere two quarters into its life as a public company, it didn't have to deal with the intense competitive landscape which exists today.

For example, around 250 million Instagram users make use of the Stories feature which compares to Snap's total daily active user base of around 168 million, the analyst added.

"That's a real competitive headwind that Snap faces," he concluded.

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