Topline: After its stock market debut two years ago floundered, Snapchat has made a strong comeback in 2019: Its shares have risen nearly 200%, outpacing the broader market and easily eclipsing the rest of its peers in the technology sector.
- Now valued near $23.5 billion, Snapchat sits at $17 per share, up from a $7.2 billion valuation and all-time low of $4.99 per share last December, according to Bloomberg data.
- Snapchatâ€™s stock has eclipsed its peers in the tech sector this year: It is by far and away the best-performer in the iShares U.S. Technology ETF. While rival companies like Facebook and Pinterest are up 40% and 23%, respectively, they canâ€™t compare with the triple-digit growth in Snapâ€™s share price.
- Strong earnings in recent quarters (with fewer losses than Wall Street had expected), new revenue opportunities, and improved profitability have all helped drive Snap shares higher this year.Â
- After being written off two years ago, the social media companyâ€™s user base and engagement is finally growing again. When Snap had its IPO in March 2017, valued at $31 billion, it hoped to become the next big Facebook. But the app never really caught on with the massesâ€”instead, mostly with younger users, as many adults and advertisers found it difficult to use.
- Over the last year and a half, the company has transitioned to focus on its younger users again, exploring new revenue opportunities like Snap Games, which was rolled out in the spring. Some Wall Street analysts already predict that the new gaming business could be a big growth driver for Snapchat going forward. Evercore ISI analyst Kevin Rippey, for instance, sees it bringing in as much as $350 million in revenue each year by 2022.
- Snap has ten â€œbuyâ€ ratings, 25 â€œholdâ€ ratings, and 4 â€œsellâ€ ratings from Wall Street analysts, according to Bloomberg data.Â
What to watch for: Third quarter earnings, due in November, will be an important indicator. The companyâ€™s second quarter earnings, released in July, saw revenue increase 48% year-over-year to $388 million.
Surprising fact: Despite growth prospects, itâ€™s still important to remember that Snapchat is losing money: free cash flow dropped by 32%, from losses of nearly $78,000 to over $103,00, between the first and second quarters this year.
Tangent: Since Snapchat stock started its comeback, CEO Evan Spiegelâ€™s net worth has grown from just over $1.4 billion to $3.7 billion.
Critic: While Susquehanna Financial Groupâ€™s Shyam Patil remains optimistic about the companyâ€™s continued momentum in the short-term, Patil highlights that the stockâ€™s â€œvaluation remains elevated,â€ compared to peers like Facebook and Twitter, and points out competition with Instagram as another potential downside risk, writing that â€œSNAP must hold onto the key 18-34 demographic to attract advertisers.