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DEEP FOCUS: Everything you need to know about Snap (SNAP) stock

By Toby |
snap stock

Snap Inc. (NYSE: SNAP) is a technology and camera company whose flagship product is the social media application Snapchat. Another product is Spectacles, a wearable camera that can be connected to a person’s Snapchat account and used to record videos.

Snap generates the majority of its revenue from advertising. Its advertising products include Snap Ads and Sponsored Creative Tools.

Competition and market share

Snap is a perfect example for how smaller players get crushed by established firms, as its efforts to gain a foothold in the social networking space have continuously been challenged by bigger rival Facebook (NASDAQ: FB). Instagram was added to the Facebook fold after the latter’s attempts to acquire Snap a few years ago failed. After giving it a tough competition for long, Instagram recently surpassed Snapchat in terms of popularity and user base.

In addition to Facebook, Snap competes with the social media arms of almost all the leading tech firms, including Twitter (NYSE: TWTR), Google (NASDAQ: GOOGL) and Apple (NASDAQ: AAPL). Meanwhile, some other tech biggies are working on products that will compete directly with Snapchat and it is likely that their dominance in the industry will give them an upper hand in the long term.

At the end of the first quarter ended March 2019, Snapchat had around 190 million daily active users, down from 191 million a year earlier. The user base of Instagram is more than double that number. Statistics show that the photo-sharing app is used by around 90% of the population in the 13-24 age group in the US, which is expected to increase further once the newly launched Android application reaches more persons.  

Snap daily active user trend

Financials

Snap has not been a profitable company and it won’t be in the near future. In 2018, its first year as a public company, Snap reported losses amounting to 47 cents per share. However, as the company grows and captures more markets, it is expected to cut down on its losses.

Analysts currently project a narrower loss of 30 cents per share in the current fiscal year and even lower 11 cents per share in the year after that.

snap average revenue per user

Meanwhile, revenues are projected to grow 35% in the current quarter driven by its expanding user base. However, the rising adoption of similar services by rivals could hamper this growth rate.

From a Wall Street perspective, Snap has consistently topped earnings estimates. It has a remarkable average earnings surprise rate of 23%.

Cash position

Snap’s cash position has remained weak due to its continuous investments in purchases of marketable securities, despite cutting down on the purchase of property and equipment. However, there has been a marked decrease in the expenses associated with the operating activities over the quarters.

snap cash details

Snap has invested heavily in the advertising platform, including the launching of dozens of new capabilities to deliver a scalable return on investment for an increasing variety of advertisers.

Street view

Snap has had a dream run in the bourses with the stock skyrocketing above 170% this year. When it comes to Street sentiment, out of the 23 analysts tracked by TipRanks, six have given Buy; 14 recommend Hold; 3 have a Sell rating. However, the 1-year price target range of $13.21 is at a downside of about 10% from today’s trading level of $14.

LISTEN TO: Snap Inc Q1 2019 earnings conference call

Credit Suisse is bullish on the camera company and sees Snap’s user growth surpassing estimates due to the revamped Android app and improved revenues from ads in the latter half of the year.

The street expects Snap to benefit from the introduction of gaming into the platform along with new feature like genderswap filter, which is expected fuel user growth. These features are also expected to increase the time spent by users on the app. According to market observers, these introductions would pave way for monetization in the future.

Get access to timely and accurate verbatim transcripts that are published within hours of the event.

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