Recently, Snap (SNAP) reported better earnings than expected for the first quarter. It also gave the outlook of the second quarter which also exceeded expectations. It is this report that leads to the question – Is Snap stock a buy?
If you are wondering what to invest 1000 pounds in, you might want to read this piece blow by blow. About a decade ago, Snap founders had an idea to revolutionize how photos and videos were displayed in the thriving social media space.
They came up with the proposal of a social media app that allows users to post photos and videos that disappear from the platform in around 10 seconds. Their idea was based on the notion that younger social media users did not want their social history to haunt them later.
Their idea was spot on as it didn’t take long before 50 million snaps were being posted every day. Moreover, there were millions of new users downloading the app. Snap owns Snapchat, a smartphone app that can manipulate and enhance images and videos in many ways.
Facebook Made an Offer to Buy Snapchat
Mark Zuckerberg, Facebook’s CEO, liked Snapchat so much that he offered to buy the company in 2013 for 3 billion USD. However, Evan Spiegel, the Snap CEO, declined the offer.
Later in 2017, Snap scored big with its Initial Public Offering, which raised 3.4 billion USD giving it a market valuation of 23.8 billion USD. This made Snap the largest US-listed IPO amongst tech companies since Facebook.
Company first-quarter earnings reports show that Snap has 281 million daily active users, a 16 million growth from the previous quarterly report. Moreover, revenue also increased by 66% to 770 million USD, topping projections of 743 million USD. This was Snap’s best quarterly revenue in three years.
Ongoing Investments, Improved Performance
The company’s Chief Executive claimed that the growth was down to continued investments in improving the performance and stability of their products across different regions and devices. Moreover, he also said that as Snapchat’s user base continues to grow outside the US, they are also evolving their team and operations to support the global community effectively.
Snap is projecting revenue of around 820 to 840 million USD in the second quarter. The company also generated positive free cash flow for the first time as a publicly-traded company.
Technical Analysis of Snap Stock
Technical analysis of the Snap stock is a key factor when determining whether the stock is worth buying. Several analyses of the stock by IBD reveal that its rating is better than that of 90% of all stocks based on the most critical and technical stock-picking criteria.
The stock’s Relative Strength Rating of 93 shows how the stock’s price performance in the past 52 weeks is better than all other stocks in the IBD database.
Final Thought
Is Snap stock a buy now? Well, based on expert opinion, even though Snap has recorded a remarkable comeback with its extra functionality and adoption of AR, you should avoid it for now. The experts argue that Snap has expressed improbability about the impending quarters. Moreover, the majority of Snapchat users are young and low-income individuals. Therefore, the company needs older users if it is to compete with Facebook.
