Things should have gone a lot differently for shares of SNAP following a much vaunted IPO. After all, the company was touted as the next social media darling. It's CEO was touted as a cooler version Mark Zuckerberg. And perhaps most importantly, its product is ingrained in the fabric of teenage society like MTV in the 90s.
SNAP as a company, however, screwed up somewhat badly. They went public before having a cogent means of monetizing their user base.
Their advertising model simply didn't work. They pushed through a rushed redesign that didn't go over well with their users. There was a ton of turnover at the executive level. Increasing cash burn became an issue and the stock sold off to the 2018 lows in the $4 range.
Investors need to understand that the SNAP of today is the company that should have IPO'd in March of 2017.
Their advertising product is now functioning like it should have been in 2017. Advertisers are able to take advantage of the fact that SNAP reaches 90% of 13 to 24 year olds in a multitude of new and creative ways. The company is also taking control of costs at the corporate level, which was always a complaint of current and prospective investors.
Additionally, the company has been increasing offerings such as introducing games and significant enhancements to its already substantial augmented reality product.
The opening tick on SNAP when it IPO'd in March 2017 was $24. In the first iteration of SNAP's business model the $24 price only functioned as an attractive exit for insiders.
In the current version of their business model that $24 price should function as a goal post for investors to where SNAP's stock is headed.
When Zenolytics originally profiled SNAP last month when it was $11 per share the $24 IPO price was one of the factors that caused our price target to be 100% higher than the price back then.
The analyst community is just now catching on as today's upgraded target on SNAP by BTIG analyst Rich Greenfield to $20 is the street high target, meaning that all of the street's price targets are not quite high enough.
BTIG in today's report says "too many investors are ignoring Snap's recovery, which was driven by the overpromising/missed expectation cycle of the first two years after the IPO."
Exactly right.
Zenolytics continues to see SNAP as a $22 stock and it may get to that point a lot faster than investors think.
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