It’s no secret that Snap Inc., the founder of social sharing app Snapchat, hasn’t exactly had a great time since their March 2017 IPO. As Facebook and Instagram copied some of the app’s most unique features, its user growth has been less than expected. But there’s reason to be optimistic in the long term.
First, there are the advertisers. “What you’re starting to see is serious advertisers are recognizing Snap as an ad platform of scale alongside Google and Facebook, and [advertisers] want a third alternative,” said Bill E. Ford, CEO of General Atlantic, one of Snap’s investors, in a May 2017 interview.
It’s true that Snap missed some of its Q2 goals. Its revenue was $181.7 million versus the $189 million expected. Its earnings per share were a net loss of $0.16, and its daily active users were 173 million versus an expected 175 million.
But the feared stock dump after the end of the 180-day lockup period did not happen. Snap’s employees are apparently comfortable with holding onto their shares, and Snap founders Bobby Murphy and Evan Spiegel announced they would not sell their shares this year.
Despite the fact that many analysts are rating Snap’s stocks a hold, and Facebook seems to be doing its best to implement Snapchat-like features in its platform, Stifel analysts think Snap can be a winner if investors are willing to ride out some of the bumps and bruises happening in the short term.
How can Snap be a winner? “First, and most importantly for the stock’s long-term prospects, there doesn’t seem to be much, if any, resistance to the advertising on the Snapchat platform,” wrote financial advisor Martin Tillier in a post on the NASDAQ blog.
That alone could be a big deal, considering the growing resistance to ads on Facebook and Twitter.
Tillier is not the only one who noticed that Snap’s users are more likely to be okay with advertising than the users of other platforms.
Mark Mahaney of RBC Capital is similarly optimistic. Even though Snapchat’s user base may have grown more slowly than projected, it is still growing. With a strong user base, the company will be able to attract more users to the platform, Mahaney told Markets Insider, adding that the company’s engagement numbers are already really strong, especially with the younger audiences that advertisers are looking for.
That’s proving to be true. According to Ford, “One data point that I think is worth knowing about is [advertising and marketing service] WPP more than doubling their ad commitment to Snap this year.”
Snapchat’s “Snap Map” feature is also helping to drive user growth. It proved its usefulness in the aftermath of Hurricane Harvey’s impact on Texas and Louisiana. “Users were able to watch first-hand accounts of the historic flooding, and journalists were able to do some fact checking using the service,” wrote Seth Archer in Markets Insider.
All in all, there’s still reason to be optimistic about Snap’s future. Between advertising and new features like Snap Map, its user base is bound to grow and become more engaged with the platform.
As of September 8 at 10:17 a.m. ET, Snap’s shares were selling at $15.58, which is lower than its initial IPO price of $17 per share. Despite the overall decline, however, Snap share values have been on an upward trend over the past month, which should be good news for investors.
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