The Snapchat adventure started in 2011 by Evan Spiegel, Reggie Brown, and Bobby Murphy, all students at Stanford University. Brown came up with the idea for a social app that allowed users to publish photos and videos that disappeared after several seconds. In 2013, Snapchat introduced two new features; Stories and Chat. These new tools allowed users to post a several snaps that will remain active for 24 hours.
2014 was a busy year, as Snapchat created “Geofilters” and introduced Snapcash. One year later, Snapchat has achieved the milestone of surpassing 75 million monthly users. The IPO of the Snapchat stock was in 2017 and Snap shares closed their first day of trading up 44% at $24.48 a share.
Fundamental View
Snapchat shows solid growth in earnings per share, which rocketed 800% in the last year. It’s also considered a healthy firm and has no issue meeting short-term obligations. In its latest earnings report, daily active users escalated 20% year-over-year to 319 million in total. Revenue in the fourth fiscal quarter of 2021 surged 42% and full year revenue soared 64% year-over-year. This marked the first quarter of positive net income as a public company for Snapchat.
However, the Snap stock was declining in value the past 5 months, which began on the 22nd of October. Due to Apple's new privacy policies, revenue missed the analyst expectations, causing the stock to collapse over 25% in one day. Since its disappointing announcement, the stock plunged over 59%.
Snapchat also has a high market valuation. Its market capitalization of $86 billion is 22 times the sales forecast for this year, and 15 times the sales forecast for 2023. Not only that, but over the past several months. insiders sold nearly 26 times as many shares as they bought. If insiders believed the company could grow exponentially, they will be buying shares, and not applying downward pressure on them.
Technical View
Looking at the Snapchat (NYSE: SNAP) stock from a technical view, the stock is trading downwardly in both the short and long term. Currently priced at $30.05 a share, the stock is trading between a support level of $29.03, and two resistance levels; one at $40 and another higher one at $48.
The average analyst price target consensus from various reputed institutes, including Goldman Sachs, City Group, and Jefferies Financial Group, is $57, with a high estimate of $93 and a low estimate of $40. This is positive thing for Snap, as analysts predict that the stock will rise by at least 33% and possibly as much as 90% in the near future.
Future Expectations
One of Snap’s offerings are its “Spectacles”, which are augmented reality smart glasses. The technology combines digital images and other data into a person's field of view. Navigation, education, games, commerce, and other applications for augmented reality technology can become the next big thing in this era exhausted with technology.
Another expectation would be the growth of digital ads. So far, the advertising outlook for social media looks positive, as digital ads will account for over 60% of total global ad spending for the first time this year, according to Zenith Media.
Before buying Snap stock, it’s important to realize that the stock market is currently in correction mode. Technology and growth stocks, which are known for consistently rising in value, have been hit hard amid escalating geopolitical tensions, so it’s better to wait until the market recovers before buying Snapchat stock.
Sources: TradingView – CNBC – TheStreet – Quartz – Forbes – MarketBeat – Nasdaq.com
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