A year and a half ago, one of the greatest short calls of our generation was made by the biggest influencer in the world—not me. I’m speaking of Kylie Jenner of course.
On February 21st, 2018, Kylie Jenner tweeted out her disgust of Snapchat and their recent user interface change that made the product extremely hard to use—even for millennials.
What happened to $SNAP since this tweet? Well, the stock price plummeted and still hasn’t fully recovered. It suffered a 73% decline—on a closing price basis—then bottomed exactly 10 months later. From the bottom on December 21st, 2018, $SNAP has rallied over 250%. As of the closing price on Friday, it is only 4.20% away from breaking even on the Kylie trade—comeback secured.
After more than a 50% decline after the tweet and slightly below $8, I started getting bullish on the stock even though I absolutely hated the company. My “gun to my head” call that $SNAP would hit $10 before $5 was close but not perfect. I would have ended up pulling the metaphorical trigger and got stopped out at the low. The stock ended up trading three days below the $5 level with the lowest daily close at $4.99. Luckily this was all done in my paper trading account. T4P.
“Don’t get it twisted, I absolutely hate this company and their product. But there is an opportunity setting up for longs at swing low around $7. Good risk/reward setup here with it being more than 40% below its 200DMA. Gun to my head I think it sees $10 before $5.” -Ramp Capital (10/5/18)
Although the stock price hasn’t fully recovered, $SNAP actually has a higher market cap based on the increase in share count over the last year and a half. From peak to trough, $SNAP suffered a decline of $16.4 billion in 10 months—woof.
Granted we can’t give Kylie all of the credit, but, you have to wonder how much influence someone like this actually has on public markets. Typically, we are used to seeing the Warren Buffetts of the world come out with press releases or newsletters that describe their next investment and the stock usually gets a pop that day. Or on the flip-side, you have activist short sellers like Andrew Left from Citron Research who typically provides bear cases on the next bubble stocks and sometimes the stock will take a hit that day.
Some of the reasons for the turnaround so far in 2019 are the upgraded user interface and the announcements that they were launching a new series of Snapchat games, more original short-form shows and a partnership with Tinder. Also the gender swap feature brought some users back to the platform.
I don’t know if those things will be profitable and drive user growth but it isn’t as dead as everyone thought it would be. I rarely use the app anymore, but I’m also not 13 years old, so I’m not their target audience. I just don’t get the appeal of it. It’s just another social media app to waste time on and provides no real world value to me. Consider me a boomer I guess.
I hope someone is tracking influencers when they talk candidly—good or bad—about public companies. They are the brand promoters so they know what’s hot and what isn’t—unless they are just trying to make a quick buck from advertisers. Though, you could probably use these types of tweets or posts as a starting point when looking for a long or short thesis on a stock. Then do some due diligence yourself and maybe one of these will turn out as a good investment. I’m sure this isn’t the first time this has happened. I don’t watch the E! or Bravo channels so please keep me in the loop if you spot another generational celebrity market call.
Let this be a lesson: Think twice next time before you bet against Kylie—the youngest self-made billionaire and stock influencer.
Full disclosure: I have no position in any of the stocks discussed in this piece.