Looks like Wall Street has given up on social media


Has social media finally worn out its welcome? Wall Street seems to think so.

This has been as bad an earnings season as they come for social media companies, and their stocks have been punished for it — all while the S&P 500 and Nasdaq are knocking on the door of new highs.

The primary data of importance on a social media platform are Monthly and Daily Average User metrics (MAU and DAU). In a social media company’s earnings report there is precious little attention paid to earnings and revenues. For these companies, it’s all about user growth and engagement.

Take Snap, for example. It beat on both the sales and revenue lines, and its loss was smaller than expected. In addition, it got a strategic investment from the famed investor fresh out of Saudi detention at the Riyadh Ritz-Carlton, Prince Alwaleed bin Talal.

The prince made a $250 million bet on Snap for a 2.5 percent stake. But the stock, which initially rose on the news, quickly fell sharply after analysts scoured the earnings report for the DAUs and found growth to 188 million users a day instead of the expected 192 million.

That was all that was needed for about a 14 percent hit to the stock on early Wednesday morning.

Twitter, whose stock was conspicuously up over 70 percent on the year going into earnings, also took a 5.5 percent hit, despite beating on sales/revenues. It too fell because of user engagement numbers: from 336 million MAU to 335 million, while the Street was expecting 338.5 million even after accounting for the company’s own purge of 70 million accounts.

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