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Why Snapchat Parent Snap has a Value Style Score of C?
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Snapchat parent Snap Inc.’s (SNAP - Free Report) Initial Public Offering (IPO) has been one of the most anticipated events of recent times. Currently, the company carries a Zacks Rank #3 (Hold) and a Value Style Score of ‘C’, which is not a favorable combination.
This is because back-tested results show that stocks with a Value Style Score of ‘A’ or ‘B,’ when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) handily outperform other stocks. You can see the complete list of today’s Zacks #1 Rank stocks here.
Snap’s stock has been on a topsy-turvy ride since its debut on Mar 2. The stock surged almost 44% from its IPO price and reached an all-time high of $29.44 the very next day. However, it lost some shine and nosedived over the next couple of weeks. Snap touched an all-time low of $18.90 on Mar 17 and is currently trading at $23.97, pretty much the same level where it once started.
We note that Snap has underperformed the Zacks Internet – Software industry since its debut. While the industry gained a modest 0.06% over this short period, Snap shares declined 2.7%.
Fundamental-Valuation Disconnect Hurting Snap
Snap’s topsy-turvy ride is the result of a slew of factors, both positive and negative. While the news of a $500 million investment by NBCUniversal assured investors of Snap’s growth potential, slowing user growth, smaller total addressable market (TAM) compared to Facebook and stiff competition from the likes of Instagram, WhatsApp, GroupMe, Line, WeChat and Tango were cited as the major weaknesses.
Moreover, Snapchat’s incredible valuation despite being a loss making company compelled analysts to remain on the sidelines. Reportedly, in 2016, Snap’s revenues of $404.5 million were nearly six times higher than the 2015 levels. However, net loss for the year widened to $514.6 million from $372.9 million in 2015.
Notably, Snap has lost money since it began operations in 2011. Despite that, the company’s valuation reached a massive $34 billion (84 times of 2016 revenues) on debut, making it the biggest IPO since Alibaba (BABA - Free Report) in 2014 and much bigger than Facebook.
Slowing User Growth a Concern
Snapchat’s slowing user growth is a major concern. The company added only 5 million active daily users in the fourth quarter of 2016, which happens to be the lowest since the third quarter of 2014. User growth holds the key in attracting advertisers, which is the primary source of revenues for Snapchat.
Per research firm eMarketer, Snap’s (SNAP - Free Report) ad revenues for the current year are projected to be $770 million, $30 million less than the earlier estimate (Sep 2016) due to “higher-than-estimated revenue sharing with partners.” Despite the slash, revenues are still expected to be up 157.8% from last year. (Read More: Snap Inc's Revenue Forecast Slashed, Shares Fall)
Stock to Consider
We note that j2 Global with Zacks Rank #1 is a better-ranked stock. The stock also has a favorable Value Style Score of ‘B’.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>
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Why Snapchat Parent Snap has a Value Style Score of C?
Snapchat parent Snap Inc.’s (SNAP - Free Report) Initial Public Offering (IPO) has been one of the most anticipated events of recent times. Currently, the company carries a Zacks Rank #3 (Hold) and a Value Style Score of ‘C’, which is not a favorable combination.
This is because back-tested results show that stocks with a Value Style Score of ‘A’ or ‘B,’ when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) handily outperform other stocks. You can see the complete list of today’s Zacks #1 Rank stocks here.
Snap’s stock has been on a topsy-turvy ride since its debut on Mar 2. The stock surged almost 44% from its IPO price and reached an all-time high of $29.44 the very next day. However, it lost some shine and nosedived over the next couple of weeks. Snap touched an all-time low of $18.90 on Mar 17 and is currently trading at $23.97, pretty much the same level where it once started.
We note that Snap has underperformed the Zacks Internet – Software industry since its debut. While the industry gained a modest 0.06% over this short period, Snap shares declined 2.7%.
Fundamental-Valuation Disconnect Hurting Snap
Snap’s topsy-turvy ride is the result of a slew of factors, both positive and negative. While the news of a $500 million investment by NBCUniversal assured investors of Snap’s growth potential, slowing user growth, smaller total addressable market (TAM) compared to Facebook and stiff competition from the likes of Instagram, WhatsApp, GroupMe, Line, WeChat and Tango were cited as the major weaknesses.
Moreover, Snapchat’s incredible valuation despite being a loss making company compelled analysts to remain on the sidelines. Reportedly, in 2016, Snap’s revenues of $404.5 million were nearly six times higher than the 2015 levels. However, net loss for the year widened to $514.6 million from $372.9 million in 2015.
Notably, Snap has lost money since it began operations in 2011. Despite that, the company’s valuation reached a massive $34 billion (84 times of 2016 revenues) on debut, making it the biggest IPO since Alibaba (BABA - Free Report) in 2014 and much bigger than Facebook.
Slowing User Growth a Concern
Snapchat’s slowing user growth is a major concern. The company added only 5 million active daily users in the fourth quarter of 2016, which happens to be the lowest since the third quarter of 2014. User growth holds the key in attracting advertisers, which is the primary source of revenues for Snapchat.
Per research firm eMarketer, Snap’s (SNAP - Free Report) ad revenues for the current year are projected to be $770 million, $30 million less than the earlier estimate (Sep 2016) due to “higher-than-estimated revenue sharing with partners.” Despite the slash, revenues are still expected to be up 157.8% from last year. (Read More: Snap Inc's Revenue Forecast Slashed, Shares Fall)
Stock to Consider
We note that j2 Global with Zacks Rank #1 is a better-ranked stock. The stock also has a favorable Value Style Score of ‘B’.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>