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SNAP

Snap NYSE:SNAP Stock Report

Last Price

US$10.19

Market Cap

US$16.8b

7D

-2.6%

1Y

-86.2%

Updated

29 Sep, 2022

Data

Company Financials +
SNAP fundamental analysis
Snowflake Score
Valuation2/6
Future Growth1/6
Past Performance0/6
Financial Health5/6
Dividends0/6

SNAP Stock Overview

Snap Inc. operates as a camera company in North America, Europe, and internationally.

Snap Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Snap
Historical stock prices
Current Share PriceUS$10.19
52 Week HighUS$79.30
52 Week LowUS$9.34
Beta0.97
1 Month Change1.80%
3 Month Change-22.63%
1 Year Change-86.21%
3 Year Change-28.74%
5 Year Change-29.63%
Change since IPO-58.37%

Recent News & Updates

Sep 23

Snap hires ex-Peloton executive as new head of compliance

Camera company Snap (NYSE:SNAP) has hired the former head of compliance and risk at fitness equipment maker Peloton (NASDAQ:PTON) as its new chief compliance officer. Bertrand Lanciault III, also known as Lance Lanciault, made the move to join Snap (SNAP) in August. The move to Snap (SNAP) was initially reported by Radical Compliance and the month was confirmed by The Wall Street Journal, citing a spokesman for Snap (SNAP). Lanciault started at Peloton (PTON), which has struggled to overcome its post COVID-19 pandemic surge as well as safety issues with some of its hardware, in February 2021. He had previously been at Walmart (WMT) for six years, according to his LinkedIn profile. Earlier this month, Bank of America reiterated its buy rating on Snap (SNAP), noting that the positivity in Chief Executive Evan Spiegel's leaked memo was encouraging.

Sep 15

Snap: A Speculative Take On The Future

Summary Market's focus on profitability has obliterated the stock's return in the last year and its currently trading below its IPO price. Company has enough cash to survive short-term pain and execute on its long-term vision. If Snap's vision of future is achieved, company would have the first mover advantage immune to competition. A small position in Snap relative to the overall portfolio could work very well in the years to come. Speculative case Snap (SNAP) is down more than 80% percent from its all-time highs. This trend has been mirrored by all growth stocks to an extent, but not all growth stocks are born equal. Although top line growth is a key indicator for growth names, when speculating on a growth name one has to consider two key points: Survivability Vision for the future and its execution Snap checks both of these boxes, and if an investor is willing to look past the current market commentary about the stock, the reward to risk ratio looks highly attractive. The good, bad and ugly The Good Snap has been able to show exploding topline growth with its revenue growing 10 times since its IPO in 2017 ($404M → $4.5B) and the average revenue growth rate for the last three years alone being 52%. Even with the slowing economy, the first two quarters of 2022 showed significant growth in QOQ revenues (38% and 13%). Average revenue per user has also been steadily improving and comparable to Facebook at the same age. Average Revenue Per User (Company Website) But how does it matter if even with all this growth the company is not able to turn a profit? (SNAP has not achieved a profit for any year of its existence.) Although this is a typical trajectory for a growth stock and they can still eventually become behemoths, there are also companies that have bit the dust following the same trajectory. The key differentiator here is survivability. How are the revenues being utilized? Does the company have enough cash to survive during lean times and survive long enough to be able to fully execute its vision? (Present situation being the case in point.) Looking at the income statement for 2021, gross profit ratio has been continuously improving and stands at 58% which bodes well for the company. 38% percent of the revenues goes towards R&D expenses which is only the company reinvesting in itself for future growth. A troubling metric could be the high SG&A spend relative to revenues which stands at 37%. From the latest investor update, there are clear signs that the company is reining in its spending by reducing its headcount by 20%, lowering marketing spend, reducing real estate investments, infrastructure costs and fixed content costs to further drive profitability and reprioritizing investments in areas not directly connected to the main priorities. In terms of cash, the company is sitting on approximately $4.9B, which fully covers all outstanding debt with no debt maturing before 2025. As long as the top line grows even at modest rates and the company has an eye on its cash burn, there is no question of the survivability of this company for the next couple of years. What can one expect in the near term? Snap has seen its daily active users double since its IPO and it currently stands at 347 million. This has been possible due to the expansion of the app outside of its core North American market and the company continuously improving their core product offering. Daily Active Users (Company Website) Currently, the company has 25% penetration in North America followed by 15% penetration in Europe and 6% penetration for rest of the world. Clearly, there is further room to grow in terms of total addressable market. While there is no public information on the future pipeline of products from the company, there is clear evidence of monetization attempts from its releases - Snapchat+: A premium subscription service in limited countries that offers users access to a collection of exclusive, experimental, and pre-release features in the messaging app at $3.99 a month. The service reached more than a million users within a month of its launch and is expected to reach 4 million users by end of the year with its launch in more countries and additional features being exclusive to the service. Spotlight: Snap's answer to short form video content which has seen steady adoption. YoY, total time spent watching Spotlight content increased 59% and monthly active users grew 46% to reach more than 270 million in Q2. Ads placed on Spotlight will drive further monetization on the platform. Snap Map: A location sharing feature with additional layers providing location based information/places (places could be restaurants, events etc.) on an interactive map. Location based information can ultimately be turned to location-based advertising with highlighted promoted places to further drive engagement and revenue from its users. Snap's vision of the future and its execution We have had multiple eras of innovation with personal devices with post-2010 being the age of smartphones. When it comes to the next wave of innovation for personal devices, there are three schools of thought - Virtual Reality, Mixed reality and Augmented reality Arguments could be made as to why one will trump the other and currently no company is making the case that all can flourish. While both Mixed Reality and Augmented Reality aim to serve as a complement to your current physical environment, Virtual Reality completely aims to take you to a virtual environment. Among the publicly listed companies with established products in each space; Mixed reality is primarily tackled by Microsoft's HoloLens, Meta's Oculus is completely in the VR space and Snap's Spectacles is fully in the Augmented Reality space. Speaking to Snap's vision for the future from an AR standpoint, right from its first launch of lenses back in 2015, users have engaged with AR lenses 6B+ times per day on an average. Snap has been able to continuously be in the limelight for the next viral Augmented Reality feature for the past several years (Dancing Hotdog, Baby face, Crying lens, Shook lens etc.) and a big part of the reason is because they have open sourced the software and the process of creating lenses. Lens Studio, the desktop application from Snap to build Augmented Reality experiences has been used by over 250K+ people and over 2.5M+ lenses have been created by the community. Learning from its experience of launching and using AR, Snap has continuously found new practical uses for Augmented Reality - Utility Lenses - Scanning real world objects, ASL Alphabet learning Entertainment Lenses - Building AR for art, museums and cultural experiences Shopping - Shop, browse and virtually trying on products Games - Virtual games set in real world environments Education - Augmented Reality setups to aid learning When it comes to AR hardware, company admits that the full technological leap is 5 - 10 years away. Currently, the 4th generation of Spectacles has been released only to creators as a development kit to begin experimenting and building AR experiences for the device. This strategy will serve the company well as it's not a commercial launch and therefore not have to deal with any bad public reviews on the shortcomings of the device. At the same time this will enable the company to learn from its creators and eventually release a product that can be consumed by the public. The bad and ugly (competitors and risk) The next few years could be crucial for Snap and there are factors that would prevent it from achieving its Revenue growth and Profitability. Competition from Incumbent: Snap's arch nemesis Meta (META) has been biting at its heels ever since its inception. After its plan to buy Snap failed, Meta has been taking every opportunity to beat Snap at its own game by copying its best features and has been successful more than once! It is only through continuous innovation Snap has been able to survive but this may not last long. Meta is a deep-pocketed rival with its own vision of the future. Meta's family of apps have a much larger user base and any missteps from Snap would quickly close any existing gap between the two companies. Competition from Upstart: The popularity of TikTok has been a surprise for all existing social media companies. While it has existed only half the time as Snap, its user base already exceeds Snap by a wide margin. Since TikTok and Snap are mainly targeting the same demographics, competition for the ad dollars among the two companies is intense. TikTok's short form video content is so popular that the format has been copied and implemented by most companies operating in the communication/media space and have not been nearly as successful. The good news is that Spotlight, as pointed before has also seen steady adoption, but this still has a long way to go before it can catch up to TikTok.

Sep 03

Silver Ring Value Partners - Snap: Over-Extrapolating Too Far Into The Distant Future

Summary I bought SNAP in the fall of 2021 when market cap was around $100B, and revenue was ~ $4B. SNAP wasn’t yet making a profit, despite its astronomical valuation. There might not be another opportunity to buy put options such as these at attractive prices for many years to come. The following segment was excerpted from this fund letter. Snap (SNAP) I bought SNAP put options in the fall of 2021, when the stock was above $70 and its market cap around $100B. With revenues of ~ $4B in 2021, this put the company at a whopping 25x sales. I refer to a multiple of sales only because the company wasn’t yet making a profit, despite its astronomical valuation. I strongly believed that market participants were over-extrapolating a few years’ worth of high sales growth too far into the distant future. This growth was likely temporarily boosted as advertisers experimented during COVID, attempting to reach customers in new ways. In other words, it was benefiting from unsustainable forces. Having followed the media space for two decades, one thing that I have observed is that change happens slowly. Advertisers rarely abandon an old medium in a wholesale fashion or embrace a new one in such a way. Instead, they shift their budgets incrementally, experimenting and measuring Return on Investment ((ROI)) along the way. Snap might be an interesting and, to a segment of the population, useful social media app. It’s quite possible that its usage will grow, as will its revenue. However, the likelihood that the business would grow at a magnitude and duration implied by the stock market price was very low. That’s just not how advertising works. I bought the put options for January 2023 with a strike price of $27. I believed that this would give us both a reasonable amount of time for the bubble to burst, and a ~ 10x risk/reward. The position was sized as 0.5%. Many such options will expire worthless, and risk management is important. Fast forwarding to July 2022, less than a year later, and the same stock was now trading in the single digits. Mind you, sales are still growing, just not quite as rapidly as starry-eyed investors thought they would. We got close to the 10x targeted payoff. The extra benefit is that this capital became available just as a number of our holdings reached extreme valuation levels in the 30% to 50% range. If I am proven to be correct on their values, the 10x return from the SNAP put options will be further magnified, to our benefit.

Aug 26

Snap: Ignore The Pessimism And Buy This Bottom

Summary SNAP continued its recovery in August after suffering a remarkable post-Q2 earnings collapse. We are confident that SNAP has staged its long-term bottom in July. Our analysis suggests that Snap's below-trend growth should normalize through FY23. Therefore, investors should expect its operating performance to improve. We posit that SNAP's valuation has reflected its near-term headwinds substantially. Therefore, it augurs well for a medium-term re-rating if Snap executes well. We revise our rating from Buy to Speculative Buy, with a medium-term price target of $14.5. Thesis Snap Inc. (SNAP) has recovered remarkably from its post-Q2 earnings malaise in July even as the ad industry headwinds intensified. Moreover, we observed that the market's positioning on SNAP has become so pessimistic in August that we posit that its valuation has likely been adequately de-risked to reflect its near-term challenges. It's arguable whether Snap has sustainable long-term competitive moats as it faces off with TikTok (BDNCE) or even its dominant digital ad peers in Meta (META) or Google (GOOGL) (GOOG). However, Snap's engagement metrics remain healthy in Q2. Furthermore, its new Snapcnat+ service reached 1M paying subscribers within six weeks of its launch. Therefore, we posit that Snap's thesis remains relevant at the correct valuation, even though it needs to demonstrate more robust profitability metrics moving forward. Notwithstanding, we are confident that the damage to SNAP's price action has dissipated much of its growth premium, as the stock seems to hold its July lows robustly. However, we need to remind investors that Snap's headwinds will likely continue through Q3, which could add potential downside volatility. Still, we are confident that its July lows should hold, in line with our assessment of the market's medium-term bottom. Therefore, we revise our rating on SNAP from Buy to Speculative Buy, with a medium-term price target ((PT)) of $14.5 (implying a potential upside of 30%). Snap's Growth Should Normalize Moving Forward Snap's valuation was configured for a high-growth thesis. Therefore, Snap's execution and the gamut of macro headwinds outside of its control have damaged its growth profile. Furthermore, intense competition from TikTok has exacerbated its challenges, as it had to monetize on a lower ad-load Spotlight. Therefore, we believe the battering by the market is justified, as Snap's competitive moats remain questionable. Snap ARPU change % (Company filings) Snap's average revenue per user ((ARPU)) growth fell dramatically to -5.9% in Q2, reflecting the severity of the downturn in the ad industry, worsened by its execution, monetization, and competitive challenges. Therefore, we can understand why investors have become so pessimistic, as Snap registered its first negative ARPU growth in three years. However, we need to emphasize that the ad industry is cyclical. Therefore, we don't think it's reasonable to expect that Snap's growth trajectory would not find a bottom, even though it has been battered. Instead, we posit that Snap's below-trend growth could start normalizing through FY23 as macro headwinds subside and advertisers resume spending. Snap DAUs change % (Company filings) Furthermore, the company's engagement metrics remain relatively healthy. Despite navigating its monetization challenges, Snap posted a daily active users (DAUs) growth of 18.4% in Q2. Hence, we are confident that Snap remains a relevant platform for active users, which augurs well when its growth trajectory normalizes. Furthermore, management's commentary suggests that Snap's revenue profile should recover robustly as ad spending headwinds improve over time. Management articulated: We're hearing supply chain pressure and inflationary costs. They're [also] getting pressure from the cost of capital, [as] capital being more expensive as well as drying up in different areas. But what we're hearing from advertisers, is that they are taking this time to reevaluate their priorities to ensure that they're making the right investments in the right places. And when we talk about digital advertising, it is the easiest thing to turn off. But it is also one of the most performant tools in their tool chest. So as things start to rebound for some of these advertisers in the areas where the macro pressures are a little bit more transitory, it's also the first thing to get turned back on. So we remain optimistic that as things hopefully start to improve in the macro we can capture that opportunity. (Snap FQ2'22 earnings call) Snap revenue change % and adjusted EBITDA margins % consensus estimates (S&P Cap IQ) Moreover, the consensus estimates (bullish) suggest that Snap's revenue growth and adjusted EBITDA margins profile should recover robustly through FY23. Therefore, we are confident that Snap's operating performance should emerge from its nadir as it laps a challenging FY22 moving ahead.

Aug 15

Snapchat+ subscribers hit 1M in six weeks of release; stock rises

Snap (NYSE:SNAP) says it's hit 1M paying subscribers to its Snapchat+ service, just over six weeks since launch. It's sharing the news as part of a drop of new features for subscribers to the offering, which it rolled out for $3.99 per month to give users exclusive, experimental and pre-release features. Snap stock is one of the top big gainers among Communication Services stocks, up 3.1% early Monday. Four new features starting today: Priority story replies make subscribers' replies more visible to "Snap Stars"; "Post View Emoji" gives subscribers the chance to find an emoji image that friends will see after viewing posts; exclusive Bitmoji backgrounds let those subscribers get more flair into their background images; and custom app icons allow users to change up the Snapchat icon on their home screen. "It’s been just over six weeks since we launched Snapchat+ and we are thrilled to share there are over 1 million paying subscribers," the company says, citing internal data as of Aug. 8.

Shareholder Returns

SNAPUS Interactive Media and ServicesUS Market
7D-2.6%-2.9%-3.1%
1Y-86.2%-40.8%-21.5%

Return vs Industry: SNAP underperformed the US Interactive Media and Services industry which returned -39.1% over the past year.

Return vs Market: SNAP underperformed the US Market which returned -20.3% over the past year.

Price Volatility

Is SNAP's price volatile compared to industry and market?
SNAP volatility
SNAP Average Weekly Movement14.7%
Interactive Media and Services Industry Average Movement8.3%
Market Average Movement6.9%
10% most volatile stocks in US Market15.7%
10% least volatile stocks in US Market2.8%

Stable Share Price: SNAP is more volatile than 75% of US stocks over the past 3 months, typically moving +/- 15% a week.

Volatility Over Time: SNAP's weekly volatility (15%) has been stable over the past year, but is still higher than 75% of US stocks.

About the Company

FoundedEmployeesCEOWebsite
20105,661Evan Spiegelhttps://www.snap.com

Snap Inc. operates as a camera company in North America, Europe, and internationally. The company offers Snapchat, a camera application with various functionalities, such as Camera, Communication, Snap Map, Stories, and Spotlight that enable people to communicate visually through short videos and images. It also provides Spectacles, an eyewear product that connects with Snapchat and captures photos and video from a human perspective; and advertising products, including AR ads and Snap ads comprises a single image or video ads, story ads, collection ads, dynamic ads, and commercials.

Snap Inc. Fundamentals Summary

How do Snap's earnings and revenue compare to its market cap?
SNAP fundamental statistics
Market CapUS$16.80b
Earnings (TTM)-US$831.10m
Revenue (TTM)US$4.54b

3.7x

P/S Ratio

-20.2x

P/E Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
SNAP income statement (TTM)
RevenueUS$4.54b
Cost of RevenueUS$1.76b
Gross ProfitUS$2.78b
Other ExpensesUS$3.61b
Earnings-US$831.10m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)-0.50
Gross Margin61.23%
Net Profit Margin-18.31%
Debt/Equity Ratio108.6%

How did SNAP perform over the long term?

See historical performance and comparison