Snap Inc is expected to announce its IPO price as soon as Wednesday, but Global Equities Research analyst Trip Chowdhry believes investors would be wise to steer clear of the social media stock. In his first-quarter social media report, Chowdhry explained how the social media market has become saturated.
“The social media industry is in fix-it mode and is now a zero-sum play,” Chowdhry said. “We are at the tail-end of the social media industry boom.”
According to Chowdhry, the latest innovations from Twitter Inc TWTR, Facebook Inc FB, Alphabet Inc GOOG GOOGL and others have no staying power in the market. He points out that the last major social media phenomenon, Nintendo Co., Ltd (ADR) NTDOY’s Pokémon GO, only lasted roughly three months.
“LiveStreaming, SnapChat, Facebook Live, Instagram, and YouTube are bringing more video user engagement, but we cannot make this a durable investment thesis since the industry is now in a zero-sum play,” he wrote.
Chowdhry was particularly harsh on Snap, calling the company “total junk” and adding that “durability is absent.”
Chowdhry notes that a major under-the-radar threat to these social media companies is the emergence of ad-blocking software. These companies rely heavily on ad revenue, but he doesn’t see ad-blockers going away anytime soon.
In the past year, the Global X Funds SOCL is up 41.1 percent.
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