SNAP

Snap Inc

TMT


Presented:06/05/2020
Price:$20.33
Cap:$29.39B
Current Price:$11.04
Cap:$18.32B

Presented

Date06/05/2020
Price$20.33
Market Cap$29.39B
Ent Value$16.11B
P/E RatioN/A
Book Value$1.48
Div Yield0%
Shares O/S1,445.43M
Ave Daily Vol33,593,882
Short Int9.55%

Current

Price$11.04
Market Cap$18.32B
Snap, Inc. engages in the operation of its camera platform. Its products include Snapchat, using the camera and editing tools to take and share Snaps, Friends Page, which lets users create and use Stories, Groups, Video and Chat, Discover for searching and surfacing relevant Stories, Snap Map, which shows friends, Stories and Snaps near the user, Memories, for saving personal collections, and Spectacles, wearable sunglasses capable of taking Snaps and interacting directly with the Snapchat application. The company's primary source of revenue is advertising. Snap was founded by Frank Reginald Brown IV, Evan Thomas Spiegel, and Robert C. Murphy in 2010 and is headquartered in Santa Monica, CA.

Publicly traded companies mentioned herein: Alphabet Inc (GOOG, GOOGL), Facebook Inc (FB), Snap Inc (SNAP)

Highlights

The presenter is long shares of Snap Inc (SNAP), which has experienced an impressive turnaround since the company began its management shakeup in late 2018. He notes that many aspects of the business, including cost discipline and execution, have improved and that this turnaround is evident in SNAP’s overall product and performance. Expectations entering 2020 were high, but the outbreak of COVID-19 caused major concerns regarding the digital advertising landscape. Market sentiment on SNAP fell especially hard given the consensus that it is experimental and lower quality than other platforms, and therefore would be impacted by advertisers shifting their digital spend to proven platforms like FB and GOOGL. Due to this concern, SNAP’s share price fell from ~$19 to ~$8 at the depth of the March selloff. The business has been more resilient than expected, due in large part to direct response (DR) contributing a larger portion of revenue than anticipated; DR as a share of total ad revenue has doubled over the last two years and now accounts for >50% of SNAP’s overall revenue. While the stock has recovered and recently reached $20 per share, the presenter believes there is further upside to ~$25 per share (10x EV/Sales multiple on his 2021 estimate) due to underappreciated tailwinds that will drive topline and margins going forward. 

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Idea Discussion

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