![]() Obviously all investments require numbers and projections(your assumptions about the future). ![]() The interesting thing about Snap is that it's IPO happened early in the cycle at very high valuations. And what better way for the market to value SNAP as it does Facebook than to show that it can get revenues and earnings growth accelerating again. At the same time, SNAP could be pressuring Facebook to lower its own prices.ĭididay's report notes that these 10% off promotions began in the middle of May and are expected to run through mid-June, which is when Snap's second quarter comes to a close. SNAP is giving a discount of about 10% percent, which isn't a huge discounts, but advertisers who are looking to attract users are under the age of 34, are poised to take the plunge. SNAP is reportedly offering ad buyers discount coupons and incentive to help get ad revenue up, according to Digiday. To that end, SNAP has begun to flex some muscle by getting aggressive with its advertising and getting revenue moving in the right direction. After the first quarter earnings dip, which was borne on exaggerated expectations, SNAP should demonstrate that it has a viable business model that can garner enough of the advertising market to make the current Facebook/Alphabet duopoly less of a thing. I expect SNAP, despite its high and arguably expensive valuation, to follow the early paths of Facebook. While I won't predict SNAP will be around for five decades, the idea that it is a dead company after one quarter goes far beyond idiotic. It's no different than the intense "admiration" Apple ( AAPL) CEO Steve Jobs and Microsoft ( MSFT) CEO Bill Gates had for each other's products at the dawn of the computer age.Īnd in case you haven't noticed, both Apple and Microsoft are doing pretty okay today. In that regard, I give Facebook CEO Mark Zuckerberg tons of credit. That's going to be a tall order, given that Snap CEO Evan Spiegel faces fierce competition from Facebook, which has "flattered" Snap by "modeling" some of Snapchat's features into its own products. They're going to have to put up some extraordinary growth numbers over the next couple of years in order to justify their current valuation and support multiple expansion. ![]() There's no question Snap must continue to prove its mettle in the social media space before staking a claim in the advertising market currently dominated by Facebook (FB) and Google parent Alphabet ( NASDAQ:GOOG) ( NASDAQ:GOOGL). How social media companies should be valued has long-been an issue for analysts. From my vantage point, SNAP stock, which is now above its 50-day moving average, is heading back to $24 per share, closing the gap it created on the first-quarter earnings disappointment. But few high-growth companies are trading at their book value. This is because the shares are also well above the company's price-book ratio of $17.6. Arguments were made that the 24% decline Snap suffered following its first-ever earnings report earlier this month was an overreaction.īut the bears are now proclaiming the recent bounce in SNAP stock, which puts the shares at 25% above their IPO price, is even more of an overreaction. Shares of Snap Inc ( NYSE: SNAP), the parent of popular messaging app Snapchat, have surged as much as 25% since falling to its post-earnings low of $17.59.
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