Zenolytics is recommending shares of SNAP for aggressive portfolios with an intermediate to long-term time horizon. Initial price target on the shares is $22.
SNAP's problems post-IPO had everything to do with the fact that while company is extremely popular among younger individuals, it didn't have in its possession a cogent pathway towards gaining revenue from advertising. Initial plans were scatter-brained and poorly executed. This lack of vision led to a precipitous decline of greater than 80% from 2017 to the end 2018 in the share price post-IPO.
Recently, however, the company has been executing on an ad strategy to its young audience. SNAP reaches 90% of 13 to 24 year olds in the U.S., putting it in a leading position among advertisers who want to reach this audience. A recent report by Statista show that Generation Z users rate SNAP as their favorite destination with Instagram a close second. In a perfect world, SNAP should have waited for their traction and consistency in advertising to reach present levels prior to issuing shares to the public. The company's lack of patience in going public is an opportunity for new investors.
Among the many improvements, SNAP has tweaked its Android offering recently, allowing previously disgruntled advertisers to come back to the company. There has also been a broad diversification of their social media offerings, focused on gaming and ecommerce, allowing the company to greater leverage its massive user base.
Some highlights from the recent conference call:
CEO Evan Spiegel: “As of March, our ads can now reach more 13 to 34 year olds than Instagram in the United States. Our business generated revenues of $320 million in Q1, an increase of 39% year-over-year and our year-over-year revenue growth increased by three percentage points versus the prior quarter. Our adjusted EBITDA loss in Q1 was $123 million, representing a 43% improvement year-over-year. This is the second consecutive quarter, where more than 100% of our incremental year-over-year revenue flowed through to our bottom line.”
CEO Evan Spiegel: “As of the end of Q1, our new Android application is available to everyone. Compared to the prior version it is 25% smaller, opens 20% faster on average, and is modularized to allow for efficient ongoing innovation. On some of the lowest-performing devices, this resulted in a 6% increase in the number of people sending Snaps, within the first week of upgrading to the new Android build.”
CEO Evan Spiegel: “We recently launched Snap Games, which allows our community to play high quality mobile games with their friends in real-time through our chat service. This was the result of more than two years of investment to create a new way to have fun with your close friends.”
Assuming continued execution of their advertising model and new offerings such as games, original content and ecommerce, SNAP has strong potential to continue its recovery throughout 2019.
A $15 billion market cap for this level of advertising reach among such an important audience is an attractive proposition given the recent improvement in overall execution and roll-out of new offerings allowing for further engagement among SNAP's audience.
Zenolytics now offers Turning Points Premium service for unparalleled insight into critical junctures for stocks, indices and commodity issues. Click here for details.
Disclaimer
This website is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained on this website constitutes investment advice.
This website should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein. Viewers of this website will not be considered clients of T11 Capital Management LLC just by virtue of access to this website.
T11 Capital Management LLC only conducts business in jurisdictions where licensed, registered, or where an applicable registration exemption or exclusion exists. Information contained herein is not intended for persons in any jurisdiction where such distribution or use would be contrary to the laws or regulations of that jurisdiction, or which would subject T11 Capital Management LLC to any unintended registration requirements. Visitors to this site should not construe any discussion or information contained herein as personalized advice from T11 Capital Management LLC. Visitors should discuss the personal applicability of the specific products, services, strategies, or issues posted herein with a professional advisor of his or her choosing.
Information throughout this site, whether stock quotes, charts, articles, or any other statement or statements regarding capital markets or other financial information, is obtained from sources which we, and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither our information providers nor we shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in, the transmission thereof to the user. With respect to information regarding financial performance, nothing on this website should be interpreted as a statement or implication that past results are an indication of future performance.
