Snap Inc.’s stock has been moving sideways for the last two years, as investors have focused on the deteriorating state of its business and the increasing competition it faces from Instagram and TikTok. The stock price has dropped to $10.70, a drop of over 87% since its peak in 2021.
Snap’s valuation of $17 billion, compared to Meta Platforms (parent company of Facebook Instagram and WhatsApp), is 82x less.
Snap’s sales have been declining
Snap (formerly Snapchat) is the largest social media company in the world, with more than 432 millions daily active users.
This is a very different company from Meta Platforms. It is one-product company whereas Meta Platforms is composed of multiple platforms such as Facebook and Instagram.
Meta Stock quietly grew 348% over 2 years, while the market focused on Nvidia and Apple
Snap is a popular app among Gen Z users, especially those who enjoy its sharing and camera features. It is a challenge that some of the traditional users are now older and no longer share as much.
Snap has seen its revenue stagnate as advertisers embrace other social media platforms. TikTok is a good example.
Snap’s advertising on the lucrative IoS eco-system has also had difficulty targeting users due to privacy concerns.
The annual results show a revenue increase from $1.7 Billion in 2019 to $4,606 billion in 2023. The company’s revenue in 2023 was only a slight increase over the $4.601 million it earned last year.
Snap’s management is constantly looking for new growth levers. This has resulted in Snap never achieving annual profitability. In 2023, Snap’s loss was only $1.32bn. This is a slight decrease from $1.42bn it lost the year before. Snap lost more than $5 billion over the past five years.
Evan Spiegel’s team has been trying to create the next great thing in order to diversify their business. Snapchat Spectacles was the first product, and it became popular at first but then crashed.
Management is working now on the augmented reality industry, which is still a new one. Analysts believe these investments are unjustifiable. It also released its Generative AI Models, in partnership with Live Nation and Cartier.
Snap also aims to copy TikTok. However, there is some doubt as to whether this relaunch would be successful in the long run.
Here’s what you can expect to earn if you buy Snap stocks today for $1,000.
Earnings are expected to be high.
Snap’s earnings will be released on Tuesday, after the close of markets.
Snap reported a revenue increase of $1.23 Billion in its second quarter compared to the $1.06 Billion in the previous year. The average revenue per customer increased to $2.86 while the operating margin decreased to minus 21 percent.
Results also revealed that the number of monthly active users reached 850,000,000 for the very first time, which is a huge milestone. These users come mainly from Asia and South America. Snap has not seen any growth in its largest North American market. Its 100 million daily active users are stable.
North America is important for the business because an individual user is worth more than all other users combined. North America’s ARPU increased to $7.67 during Q2, which is much higher than global average $2.86.
Yahoo Finance estimates that Snap’s average revenue is around $1.36 Billion, which represents a 34 percent increase over the previous year. In addition, the company is expected to provide an estimate of revenue for Q4 of $1.56 billion. This represents a 22,5% rise from last year. The company’s annual revenue is expected to be $5.34 Billion, then $6.08 Billion.
Snap is performing modestly, however we believe the company should be focusing on cost-cutting and increasing profitability. Snap’s gross margins are 53%, which is much lower than Meta’s 81%. Meta’s profit margin is 34%.
Snap’s value would rise to $2 billion if it could match Meta’s 34% profit margin.
Stock price snapshot
TradingView Snap Chart
Snap’s share price is shown in the weekly chart to have moved sideways over the last two years. The price has moved from $7.18 to $10.7 in 2022, while remaining above an important support level.
Stocks’ attempts to recover were hampered by a large resistance of $17.25 per share in 2024. The stock has been slightly below both the 100-week and 50-week moving mean.
Snap has a history of showing significant volatility following its earnings. In this report I think that shares of Snap will experience a negative breakout and possibly retest $7.18, an important support. In the alternative, the stock could rise and test the resistance level at $13.
The post Snap Stock Forecast: Brace for Big Moves Before Earnings may be updated as new information unfolds
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