Why Snap Shares Fell Today

Key Points

• OpenAI unveiled its new social video app, Sora.

• It could add competitive pressure to Snap, which is still losing money on a GAAP basis.

• A bad consumer sentiment reading is also weighing on shares.

• 10 stocks we like better than Snap ›

Shares of social media short-form video app Snap (NYSE: SNAP) are falling on Tuesday, having declined 9.2% at 3:08 p.m. ET.

Snap fell along with most other consumer discretionary stocks today, after September consumer sentiment readings came in lower than expected. Not only that, but artificial intelligence (AI) darling OpenAI unveiled a social media short-form video app, which could be a threat to all short-form social media companies, Snap included.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

OpenAI is taking on all of tech, it seems

Last night, Wired magazine learned that OpenAI was looking to launch a stand-alone social video app based on its Sora 2 image and video generator model. Apparently, the app will have a vertical video feed and swipe-to-scroll navigation, closely resembling TikTok, but for AI-generated content.

Today, the Sora team at OpenAI introduced the app, writing on the company's blog:

Inside the app, you can create, remix each other's generations, discover new videos in a customizable Sora feed, and bring yourself or your friends in via cameos. With cameos, you can drop yourself straight into any Sora scene with remarkable fidelity after a short one-time video-and-audio recording in the app to verify your identity and capture your likeness.

Of course, not all video-based social media will be taken over by AI, as people will still likely want to send videos of themselves to friends and close acquaintances. However, it's possible the launch of yet another social media app could eat into Snap's market share, which was already under fire from rivals like TikTok and Instagram.

In addition, many consumer-oriented companies are down on Tuesday after the Conference Board released disappointing consumer sentiment numbers for September. Last month's reading came in at 94.2, down 3.6 points from August and below the 96.0 that was expected. Since Snap depends on advertising revenues, lower consumer spending could affect financial results around the edges.

Image source: Getty Images.

Snap could be a value trap

Snap shares may be tempting for value investors, as it's down almost 30% on the year, and trades at "only" 29.7 times 2025 earnings estimates. However, that earnings projection is a non-GAAP figure that doesn't count stock-based compensation, of which Snap pays a massive amount. If you factor stock-based comp as a real cost, Snap is still losing a significant amount of money -- over $400 million in net losses in the first half of the year alone.

Only growing at a single-digit pace and now with new competition from OpenAI, Snap remains a stock to stay away from, at least for now.

Should you invest $1,000 in Snap right now?

Before you buy stock in Snap, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Snap wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $650,607!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,114,716!*

Now, it’s worth noting Stock Advisor’s total average return is 1,068% — a market-crushing outperformance compared to 190% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of September 29, 2025

Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.