Snapchat shares: Price analysis before buying or selling

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ISIN code: US83304A1060

Ticker: NYSE: SNAP

Index or market: NYSE

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Elements to consider before selling or buying Snapchat shares

Analysis N°1

The fact that the Smartphone market is booming leads to the growing popularity of applications such as Snapchat.

Analysis N°2

Snapchat could also benefit from the significant development of teleworking. With more and more people working from home, there is an increasing dependence on instant messaging tools.

Analysis N°3

Snapchat could attract more companies and advertisers thanks to its international dimension.

Analysis N°4

The recent scandals that have affected other social networks and instant messaging services are of course benefiting Snapchat, which is currently the only application that allows automatic deletion of messages and photos. Confidentiality therefore remains one of the company's strong points for the future.

Analysis N°5

But, the competition that Snapchat faces is always very present and multiple. It is therefore essential for the company to continue the race for innovation in order not to lose market share.

Analysis N°6

Snapchat's innovation capabilities, particularly due to the lack of profits and therefore a lower investment capacity in R&D, remain problematic to stay up to date and offer new functionalities.

Analysis N°7

Snapchat also suffers from certain legal restrictions in some countries that reduce the chances of international development and growth.

Analysis N°8

Finally, Snapchat still relies heavily on the IT infrastructure. Indeed, for instant messaging to be considered as quality, it is essential that the bandwidth and speed in the region of use are optimal. There are still many service quality problems.

Analysis before buying or selling Snapchat shares

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General presentation of Snapchat

The Snap Company, previously called Snapchat, is known for creating a free photo and video sharing application for mobile phones. It was created by students from Stanford University in the United States. Although this photo sharing system is not original, Snapchat’s time limit aspect on the viewing of media sent by users is unique. This time period varies between 1 to 10 seconds.

Snapchat was recently introduced onto the stock markets; it was valued at 24 billion dollars in the beginning of 2017.

The profits of the Snap Group are generated in several ways, here are the major ones:

Advertising revenue through the Discover space.
The purchase of bonuses notably enabling the second viewing of a received file.
The purchase of filters created by users according to their geographical location or their personal events, called ‘Geofilters on Demand’.
The sponsoring of Geofilters or lenses by brands.
The advertising displayed on the application between the different views of media or the different ‘snaps’ or during the viewing of the ‘story’.

The Snapchat share price is currently quoted on the Main Market of the NYSE and integrated into the calculation of the Nasdaq stock market index.

Photo credits: ©inkdrop/123RF.COM

The major competitors of Snapchat

If a good knowledge of the Snapchat company is essential before buying or selling this stock, you must also know as precisely as possible its main competitors on the increasingly popular market of social networks and instant messaging applications. Here is a quick overview of the main players in this sector:

WhatsApp

Also known as WhatsApp Messenger, this cross-platform mobile application offers end-to-end encrypted instant messaging over the phone network or the Internet. The messaging system has been very successful in the 2010s after being created in 2009 by two former Yahoo employees and was intended to replace SMS. Currently, this application is used by more than 2 billion people worldwide. It should be noted that this application was bought by the Facebook group in 2014 for $22 billion, including $17 billion in Facebook shares, i.e. $350 million per employee or $40 per user.

Facebook

Another direct competitor of Snapchat is the Facebook group, an American company created in 2004 by Mark Zuckerberg and which is today one of the giants of the web, in other words, one of the GAFAMs alongside Google, Apple, Amazon and Microsoft. The group offers a social sharing network as well as an instant messenger, Facebook Messenger.

Instagram

This other application and social network is a photo and video sharing service that was created in 2010 by two partners. The application was then acquired by the giant Facebook in 2012 and is now accessible on various platforms including mobile platforms as well as computers but with reduced functionality. The group currently claims to have more than one billion users worldwide, of which more than 75% are outside the United States, and is one of the leaders in this market. Remember that the name given to this social network is a suitcase word derived from Insta from the English Instant Camera and Gram from the English word Telegram.

Pinterest

This company is above all an American website that mixes the concepts of social networking and photo and image sharing. It was created in 2010 and allows users to share their interests and passions through albums of photographs gleaned from the Internet. The name given to the site is also a suitcase word derived from the words pin and interest in English or pin and interest in French.

TikTok

Finally, the latest competitor to Snapchat is the software and mobile application TikTok which is a video sharing and social networking application launched in 2016. This app was developed by the Chinese group ByteDance for the non-Chinese market and also exists for this domestic market under the name Douyin.

The major partners of Snapchat

Square

In 2014, Snapchat partnered up with Square, a company specializing in smartphone payments, as part of a strategic partnership.

BNP Paribas

In 2017, French bank BNP Paribas established a marketing partnership with Snapchat in order to reinforce its presence on social networks in an attempt to modernize itself in the eyes of active young people.

Time Warner

Still in 2017, entertainment giant Time Warner announced an investment of over 100 million dollars on content as well as advertising on Snapchat.

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The factors in favour of a rise in the Snapchat share price:

Before you start trading Snapchat shares, it is essential to implement a quality strategy, especially if you are considering taking a long-term position. In this case, the ideal is to know the strengths and weaknesses of this value in order to determine as precisely as possible its evolutionary capacities. First, we invite you to discover the strengths of Snapchat.
The first advantage Snapchat has is of course its user base. The Snapchat group currently has more than 166 million users worldwide. But this does not stop there, since each year, this figure increases by an average of 36%, which should lead to a doubling of users over the next two years.

Snapchat also differs from its main competitors by the uniqueness of its application. Unlike other social networking and image sharing software, Snapchat allows automatic message deletion. What was considered a defect when this application was released has now become a strong point in view of the controversies that affect data security in most of its competitors. This application for mobile phones is also more robust than those of Snapchat's main competitors. In any case, this is the result of various recent research that has reassured consumers.

Snapchat has also chosen to base its strategy on a younger target group of users than its competitors. Thus, it has a majority of teenagers and young adults in its regular users and this target is ideal for a future evolution of Snapchat's offer which has everything to gain by retaining its existing customers over the long term.

To make its users truly addicted and loyal, Snapchat can rely on a fun interface that is mainly based on visual content. However, it has been shown that images are more stimulating than written content and are intended to be more attractive to the human brain.

The factors in favour of a drop in the Snapchat share price:

As we have just seen, Snapchat shares have many advantages and strengths that could encourage investors to focus on a medium- to long-term bullish strategy. But before taking such a position, it is of course essential to also know the weaknesses of this company that can tip the balance towards a more mixed or downward trend. Here are the main weaknesses of this value.

Snapchat's first weakness is directly related to the undervaluation of its share on the stock market. Indeed, after a failed IPO on the stock market in 2012, the group still fails to attract and convince investors. This damages its brand image and slows down its development.

It should also be noted that the Snapchat group is struggling to diversify its activities in order to generate more income. Indeed, since its creation, the company has tried several times to diversify into different areas of what its main activity offers without any success since most projects have ended in failure with the consequence of a significant loss of money for the company. This was particularly the case with the Snapchat Spectacles application, which failed very badly.

While we can welcome the almost constant increase in the number of users of the Snapchat application, these figures actually lack transparency. Indeed, we notice in parallel that the activity models of the average user of this application become, over time, more and more irregular. The number of users who are really active and therefore potentially profitable has been falling sharply for several years now.

Another weakness concerning Snapchat and its stock market share concerns this time the group's own business model, which depends more and more on advertising in order to achieve its turnover. Indeed, since the application offered to the general public is free, more than 96% of the company's turnover comes from advertising. While this model is well suited for other digital companies such as Google or Facebook, it does not seem to really adapt to the activities of Snapchat users.

To conclude with the disadvantages of Snapchat, we can also deplore an excessive comparison of this application with the Facebook social network. However, Snapchat's model is totally different from that of these two competitors and the functionalities here are much more limited. We also know that consumers prefer to use applications such as Facebook's Messenger or Whatsapp as instant messaging rather than Snapchat, which has some limitations here.

The information supplied here is only for indicative purposes and should not be used without the completion of a comprehensive and complete fundamental analysis of this asset notably taking into account exterior data, future publications and announcements and all fundamental events and news that could influence the strengths and weaknesses or make them more or less significant. This information does not in any way constitute recommendations relating to the completion of transactions or a solicitation to buy or sell an asset.

Frequently Asked Questions

When was Snapchat Inc. founded?

The story of Snapchat Inc. begins in September 2011 with the launch of the Snapchat application on the Apple App Store. The application was previously tested under the name Picaboo. Thereafter and in 2013, the group will experience an interesting turning point with the hiring of Emily White, a former collaborator of Facebook, Instagram and Google as Operations Director and with the aim of promoting activities that will generate revenue for the company.

How did the IPO of Snapchat take place?

The Snapchat group will be listed on the stock market on 2 March 2017. This IPO will be carried out with an initial listing at $17 per share and the first session will open with a rise of more than 40%. It should be noted that Snapchat's IPO will have been the largest new IPO in the technology sector since Facebook's IPO in 2012.

Which companies tried to buy the Snapchat group?

While Snapchat is a great success with a sharp increase in the number of users, several companies will try to buy the application, including the Facebook group, which will offer more than a billion dollars, an offer that will be refused by the company Snapchat Inc. Another offer of 3 billion dollars will follow without more success. Other companies will attempt this acquisition without success, including the Chinese group Tencent and the giant Google.

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Analysis before buying or selling Snapchat shares