Snap: Investing Strategies for 2019

Snap Inc. is the owner of Snapchat, a video-and-picture-sharing app. Snap’s success came from the invention of snaps and stories: self-destroying pictures and videos. This idea has been successful because it meets people’s need to share their day-to-day lives while still protecting their privacy by not leaving a permanent trace on the Internet. However, it has been proven that this method doesn’t really protect users’ privacy. (1) (2)

Snap’s founder and CEO Evan Spiegel
Snap’s founder and CEO Evan Spiegel

Snap’s revenue comes from advertising. The company’s daily users have almost reached 200 million, but in the last few quarters growth has softened.

As you can see from the chart below, the above-10% growth that occurred in late 2015 and early 2016 seems to belong to the past. In fact, the company seems to have reached its daily active user peak: this is probably due to the success of Instagram, which has practically copied Snapchat’s 24-hour-self-destructive stories. In fact, Instagram launched its stories in August 2016, and that’s when Snapchat’s growth began to slow.

Snap’s largest market by far is North America. However, Europe, with 145% growth in the first semester of 2018, and the rest of the world with 493%, present very high market growth semester over semester. In contrast, North American revenue, with growth of just 17%, seems near its saturation level.

Snap’s history

Snapchat was created in 2011 by Evan Spiegel, Bobby Murphy and Reggie Brown while they studied at Stanford University. Snap was listed in 2017 for the stratospheric evaluation of $24 billion. (3) This has made its founders billionaires, even though the company still isn’t able to make a profit.

Snap's listing day
Snap’s listing day

Snap’s financials

Snap’s revenue keeps growing, albeit at a declining rate.

As you can see from the chart below, Snap isn’t a profitable company yet.

Snap’s stock performance

As shown in the chart below, Snap has underperformed its peers since its listing. This is due to Snap’s weak fundamentals and its inability to meet market expectations. The company, like Twitter, hasn’t been able to fight with the two 800-pound gorillas of Internet advertising: Facebook and Alphabet (Google). The battle could become even harder because another potential King Kong is swinging into the advertising jungle: Amazon. In fact, the Seattle-based company is starting to grow with giant leaps in the advertising industry.

In the stock chart below, you can observe how Snap’s stock has been going down ever since the company went public. Investors surely aren’t happy at all.

Snap: investing strategies for 2019

Looking at Snap’s financials and stock chart, it’s difficult to find a reason to invest in the company right now.

Trivia

Mark Zuckerberg, Facebook’s co-founder and CEO, has tried to buy Snapchat twice. First in October 2013 for $1 billion, then again one month later for $3 billion. In 2017. the company was listed on the NYSE for $24 billion, but its value has gone down to around $9 billion as of now. Despite this, we can say with hindsight that Snapchat’s creators were wise to refuse Zuckerberg’s offers.

What do you think about Snap’s future? Let me know in the comment section below.

Facebook: Investing Strategies for 2019.

Twitter: Investing Strategies for 2019.

Check out my book: A Beginners’ Guide to Stock Investing.

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References

1. https://www.bbc.com/news/technology-25572661. [Online]

2. https://www.imore.com/mission-impossible-how-screenshot-snapchat-without-being-detected. [Online]

3. https://money.cnn.com/2017/03/01/technology/snap-ipo-final-pricing/index.html. [Online]

4. https://www.cnbc.com/2017/07/12/how-mark-zuckerberg-has-used-instagram-to-crush-evan-spiegels-snap.html. [Online]

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