All of us know the Snapchat app, an ultimate tool for receiving nudes and sending dick pics. While you can certainly have lots of fun with this app, today we are going to take a look at something way more interesting – the Snapchat stock.
After 6 years following the app launch, Snapchat decided to prepare for its initial public offering. Snap IPO was one of the most anticipated in the market. It was one of the first unicorn start-ups that decided to go public. Initially priced at $17 per share, Snap Inc made its debut on NYSE on March 2, 2017. During the first days of trading, Snap stock skyrocketed to $29.44. IPO also added $30 billion to Snap market capitalization. That time investing in Snapchat looked a good opportunity, but the magic was gone soon.
By July 28, Snap shares plummeted below the IPO price – to $13.81. Although analysts at major investment banks still keep either “hold” or “buy” status, the majority of investors seem to have lost confidence in the company. Starting from July 31st, early investors, Snap employees, and other insiders can finally trade their stock freely. Many of them are going to sell the shares in a panic. Perhaps, now they wish Evan Spiegel accepted that goddamn $3 bln acquisition offer from Facebook a couple of years ago.
First financial results. How will Snap Stock look 1 year from now?
On the May 10th, Snap finally published its Q1 2017 earnings, so much expected by already crying Snap investors. Quarterly financial results turned out to be fucked up completely. The stock market reacted immediately to Q1 report and Snap shares crashed by 20%.
Snap reported $2.2 billion net loss, mostly resulting from the stock-based compensation related to March IPO. Revenues underperformed analysts’ predictions across the market, with $149.6 million of revenues reported. There is also a net loss of $0.20 in adjusted EPS. Last but not the least important, was the sluggish growth of daily active users. In a year, the number of Snapchat daily active users increased only by 36% – to 166 million. At the same time, its main rival Instagram reached 200 million of daily users.
Snap stock right now obviously sucks. The company does not innovate, cannot win the competition against FB and Instagram in attracting the advertising dollars. “Spectacles”, Snapchat version of Google Glass, is an absolute bullshit that does not bring enough money too. Many people agree that going short on Snap is a sound strategy, as the downward trend will persist for some time. But Snap stock will not tank.
Those who made an early bet on Snapchat are interested in selling the stock higher than IPO price. Ultra rich guys and big financial institutions will obviously try to push the stock up. They still want to look like smart investors, right?
Moreover, let’s not skip possible Snap acquisition. On August 3, Google offered to purchase Snap Inc for at least $30 bln, which is twice as much as the company’s current value. If this deal takes place, it will create a strong bullish outlook on Snapchat stocks investment.
Counting on long term plans
Before saying “fuck Snap, I’ll better invest monies elsewhere”, let’s see if Snap can happen to be a good long-term buy. The most important period is 3-10 years perspective if the company will remain afloat on its own.
Despite all the current problems, Snapchat still has a huge millennial audience and it’s definitely going to monetize on it. Slow user growth is still a growth, the demand to see your ex-girlfriend tits will not go anywhere. The only way out for Snap to rip off profits is to enhance its advertising portfolio and introduce new features on the Snapchat platform to attract more users. Snap might also go for the creation of the different product. If Snap management finds new money-making solutions, then in the long-term the stock will soar. In this case, it makes sense to invest in Snapchat shares.