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(ANALYSIS) Oh Snap! Is Snap’s Volatility Making Investors Wary?

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Snap recently released Q2 earnings, causing investors to panic, and continuing a pretty volatile stretch since their 2017 IPO. Debuting at $17 on March 2, 2017, the stock quickly rose to a high of $28.17 on March 6 of last year.

However, concerns over user growth, profitability, average revenue per user (not to mention Kylie Jenner’s $1.3B blow), have fueled investor skepticism, pushing Snap shares all the way down to $11.73, as of Aug. 21.

Q2 Earnings Highlights

  • Snap reported a sequential decline in daily active users (or DAU’s) for the first time ever—a big warning sign.
  • Snap’s DAU’s fell 1.5% from 191 million in Q1 to 188 million.
  • The DAU’s, however, rose 8% YoY (year-over-year) from 173 million in Q2 2017.
  • This decline in user growth was attributed to the disruption caused by Snap’s platform redesign—the same thing that set off Jenner’s tweet.

Earnings Review

Snap reported revenue of $262.3 million with a net loss of -$0.14 per share. This was higher compared to analyst revenue estimates of $249.8 million and earnings estimates of -$0.17.

Despite the revenue jump, Snap posted a loss of $353 million in Q2 and continues to burn through cash. Snap has raised $250 million from Saudi Prince Al-Waleed Talal for a 2.3% stake in the company.

Snap’s stock, however, rose 11% post earnings (before eventually falling again), due to revenue growth of 44% YoY, earnings beat and reduced losses.

Can Snap Monetize User Base?

One of the key challenges for Snap remains the monetization of its user base. North American users continue to drive user growth for Snap with over 100 million monthly active users.

To turn around its current trend, Snap will need to focus on improving average revenue per user over the next few quarters. Although Snap’s average revenue per user (or ARPU) rose 33% YoY to $1.4, it is still way below the ARPU for Twitter ($7.5) and Facebook ($20).

Snap’s ARPU in Rest of the World region rose 65% to $0.96 during Q2. Although the purchasing power in emerging countries continue to remain low, they provide a platform for a massive increase in DAU’s.

How Do Analysts View Snap?

Snap’s revenue is estimated to grow by 41% in 2018, 39% in 2019 and 40% in 2020. Its earnings per share (EPS) is estimated to improve 8.2% in 2018 and 25% in 2019.

Snap’s EPS is also estimated to grow at a compound annual growth rate of 27.8% over the next five years. Despite this massive growth in revenue and earnings, analysts expect Snap to post an operating loss of 72% in 2018, 43% in 2019 and 21% in 2020.

Sure, there are many unprofitable tech companies that continue to burn cash as investors remain optimistic about growth prospects and the total available market. The major problem with Snap is it competes with established giants such as Twitter and Facebook.

There are 36 analysts covering Snap. 30.5% (or 11 analysts) recommend a “buy” while 50% recommend “hold” and 19% recommend a “sell”. The average 12-month target price for Snap is $11.83 which is 6% below its current price of $12.57.

Final Verdict

There are too many variables for analysts, making investors cautious to enter the stock at current levels. Snap needs to increase its ARPU, advertising revenue and user base significantly over the next few quarters to be viewed as a safe bet.

Entrepreneurs

NBA Legend Kobe Bryant Passes Away At 41

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NBA legend Kobe Bryant passed away earlier today in a tragic helicopter crash in Calabasas, CA, according to various reports. Four other passengers, including 13-year-old daughter Gianna, died in the crash as well.

TMZ was first with the news.

The news comes as a shock to not only the basketball community, but worldwide.

Since retiring in 2016, Bryant had reinvented himself as a venture capitalist, raising $100M in 2016 for a fund that’s had made a number of successful startup investments, including Epic Games, the company behind the Fortnite craze.

As of Sept. 2019, Bryant Stibel had $2B in assets under management, invested in 28 companies, 10 exits, with three of them—Dell, Alibaba and National Vision—going public.

 

“It’s finding that winning company as an investor,” Bryant said when asked about what excited him the most: hitting the winning shot in the playoffs or finding a winning company as an investor. “Because I always expected to hit a game-winning shot growing up.”

Overall, roughly a third of the 19 active companies in the portfolio is worth more than $1B.

Bryant is survived by his wife Vanessa and three daughters, including a six-month old, born in June of last year. Along with a legacy that will live forever.

Rest in peace, Mamba.

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Here’s How Apple’s CEO Tim Cook Starts His Day

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Apple has became a trillion-dollar company. Despite the tech giant’s great numbers, how does its CEO Tim Cook actually start his day?

In a recent Axios interview, Cook revealed he starts each day just before 4 a.m. with a strict morning routine.

What that consists of might surprise you: He reads user comments about Apple products.

“I like to take the first hour and go through user comments and things like this that sort of focus on the external people that are so important to us,” Cook says.

In other words, he reads comments from fans, trolls and everything in between.

You’d think the CEO never bothers to read stuff like that; that he’d have an assistant ready to give him the rundown.

“And then I go to the gym and work out for an hour because it keeps my stress at bay.”

Workouts can be super critical. Billionaires and other successful entrepreneurs cite fitness as a key component to their success (and overall sanity).

“I seriously doubt that I would have been as successful in my career (and happy in my personal life),” Branson once wrote in a blog post. “If I hadn’t always placed importance on my health and fitness.”

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Gary Vee’s ‘$1.80’ Instagram Strategy To Hack Your Follower Count

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Entrepreneur and bestselling author Gary Vaynerchuk—aka Gary Vee!— is one of the biggest business on social media today.

His IG currently boasts 4M followers while his YouTube has near 1.6M subscribers.

The CEO of Vayner Media, Gary uses (and absolutely loves) social media to propel the growth of his business, now valued at a whopping $125 million, which even includes a media franchise.

(And no, WealthLAB’s not for sale, G.)

Obviously, if you’re someone just starting out in business, you’re looking for ways to get your business out there. How to get more followers.

For 90%+, you pick a couple of platforms, you post. More often than not, you end up with dwindling traffic, or no shares or comments.

So how do you get around that?

According to Gary Vee, you can get more followers and more engagement through a $1.80 strategy. (Well, sorta.)

Here’s how you do it.

Make a list of every hashtag that fit the work your business does. Apart from this, check out the other tags people use when generating content similar to yours.

With this in hand, check out any hashtag for the top posts surrounding that description—and then share your two cents about it as a comment.

If you were to do this ten times over, your work would equal $0.02*9 posts*the hashtags= $1.80. (Yeah, kinda corny, but you get the logic.)

Check it out here, in his own words.

Over time, this can help you snag followers, and you will continuously learn about what matters to many of your followers.

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