Snapchat plunges as Facebook struggles to take advantage of Facebook

- Snap Inc. shares have been soaring throughout 2021, and recent stumbles by Facebook Inc. its biggest social media competitor, have made the stretch of outperformance even more extreme.

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Neither of them represent the Front Line of the U.S. Government. The parent of Facebook has gained over 50% this year, more than double Snapchat's almost 20% advance. The gap has been particularly strong over the past month with Snap rising about 2% as investors bet that its upcoming results will mark another quarter of robust growth Facebook is down more than 10% in the same period, floundering amid accusations that content spread on its platforms is toxic and prospects for tighter regulation.

Other social-media stocks, Pinterest Inc. is up 17% in 2021, while Twitter Inc. has tumbled 20% on concern over users growth.

Snap s growth has really helped it stand separate from its peers and it is continuing to see strong usage and engagement, said Mandeep Singh, an analyst at Bloomberg Intelligence. At the same time, Facebook is dealing with trust issues. Because Snap is more about sharing information than messaging and entertainment, it is less tied to concerns over misinformation or corporate governance. While Facebook is not often in for controversy, recent news has been decidedly negative. A high-profile whistleblower said the company puts profits over the safety of its users and one of its earliest investors said Facebook had lost people's trust for good reasons. Facebook s apps also experienced an extreme outage earlier in the month, during which time Snapchat had surged more than 20% according to Sensor Tower data.

On Friday, Snap was little changed and Facebook fell more than 1%, even as the Nasdaq 100 Index was posting gains. A representative from Snap declined to comment. Facebook has not immediately responded to a request for comment.

Snap s 2021 outperformance can be traced in part to February, when it forecast years of revenue increases exceeding 50%, a target that easily exceeded in subsequent quarterly reports. The company s third quarter results will be released on Oct. 21, and Wall Street is looking at growth above 60% in the second quarter of 2011.

Snapchat is a much bigger company than Facebook, with more than 1.9 billion active users daily, compared to 293 million for Snap in its current quarter. Its revenue is expected to near $30 billion this quarter, compared with $1.1.1 billion at Snap.

Although that larger scale, it is also a reliable growth name, with investors expecting that revenue will increase more than 35% when it tells Oct. 25. However, the company has warned in 2021 that changes to Apple Inc. s privacy policy will be a drag.

The revisions -, which reduce data collection on iPhones, due to Facebook s recent ability to sell targeted ads - contributed to the stock collapse after its most recent report in July. In a note dated Oct. 11, Evercore ISI reported that Apple's change had diminished the competitive edge of Facebook over competition competitors in the digital-advertising space. This leveling of the playing field could be a benefit to alternative ad platforms like Snap and TikTok, because their relatively low ad prices, due to less precise targeting and measurement, may now make more business sense for advertisers, wrote analyst Mark Mahaney.

On Friday, Apple added Facebook to the firm s tactical underperform list: "Among its peers, it faces some of the greatest risks to Street estimates this quarter, in part because of Facebook's policy".

Wall Street analysts are about equally optimistic on the two stocks. Snap's consensus rating -, proxy for its ratio of Buy, Hold, Sell ratings - - is 4.48 out of five compared to Facebook ’s consensus rating of 4.55. However, the average analyst price target for Facebook points to gains of nearly 30% in the stock. The return potential for Snap is less than half that, with almost 14%.

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