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SnapChat: Are We Missing an Opportunity

2018 hasn't been good to SnapChat. It's dealt with bad earning calls, analyst downgrades, unfavorable changes to the app, Kylie Jenner openly expressing her negative feelings about the changes to the app, and a WTF moment involving Rihanna and domestic violence. All of that has left SNAP's stock trading below $15 per share. It appears Wall Street and Main Street have cut it's loses with SnapChat and moved on to companies with better prospects. We wondered though, are investors leaving when they should be accumulating? Can we as investors learn something from missing the boat on Twitter?

SNAP Revenue from 2015 to 2017

The social media space has been in the news a lot lately. There's SnapChat, and we noted all of the issues that they've been dealing with. Then there is Facebook, which has stayed in the news with issues of Russian meddling, Cambridge Analytica, unauthorized data sharing, and now a bug making private messages public. Then there is Twitter, which has quietly seen its stock price increase over 130% since the beginning of the year.

Not that long ago Twitter was the forgotten star. It seemed the company's management couldn't figure out how to create shareholder value (personally I believe the company went public too early).The stock hit the open market at $45.10 and hit a high of $74.73 seven days later. What came next was a slow decline down to $13.90 per share. The issues that plagued Twitter may sound familiar, the company couldn't monetize the app (or as well as Facebook), monthly active users weren't growing as fast as expected, advertisers didn't love it, management didn't know what they were doing. The problems that Wall Street and Main Street had with Twitter when the stock price was diving is a long list, too many issues to list here.

Monthly Active Users for Twitter and SnapChat Q1 '14 to Q1 '18

Now in 2018 some of those issues that Twitter dealt with are plaguing SnapChat. Though most investors had left it for dead, Twitter kept battling. They started showing NFL games on the platform, incorporated a few new features, increased the character limit, and made several good investments along the way. (Twitter's management issues were epic, read more about it here)

Ultimately, I believe SNAP's management needs to get serious about SnapChat. SnapChat became a big thing when droves of teenagers decided not to get a Facebook account and instead get a Snapchat account. The company has been innovative in the social media space in the past and that "OMG did you see what you can do on SnapChat" innovation needs to continue. Like Twitter I think SNAP went public too early. Today's market rarely gives a public company time to figure it out, and attempting to figure it out as a public company can be tough to deal with.

Source: Statista, Graphic: The Seville Report

I think this low stock price may be the best thing for SNAP and investors who are still holding the stock. Now that the spotlight is off of SnapChat, the company can get back to innovating like they use to. The company can put whats cool and fun before what shareholders want. This is the time for SnapChat to be experimenting with everything in order to find their way. This also may be the time for an investor to build a position. Just think, a little over a year ago Twitter was trading in the $16 range, and most investors had forgotten about it. Similar to SnapChat, investors thought Facebook would eventually make Twitter irrelevant. Smart investors paid attention to what Twitter was doing and what the company was gearing up to do. This could be the time to pay attention to SNAP.

What do you think about SNAP as an investment? Can management turn the company around? Let us know in the comments below.

The Seville Report: The Investment Newsletter

#SNAP #SnapChat #Twitter #Facebook #SocialMediaInvestments #SocialMediaInvesting #InvestingEducation #FinancialEducation #Investment

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