Social Media Stock To Watch, If Market Sell Off is Over
SNAP's stock is 80% below its all-time high following an earnings miss and an adjustment to its revenue forecast.
Apple's iPhone update that prevents companies from tracking iPhone users without the user's consent had a negative impact on SNAP, but the company may have found a workaround.
Gen Z's connection to Snapchat as well as Snapchat's work with augmented reality are two of several reasons that SNAP's stock price could bounce back in a big way.
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Story
On December 20, 2018 SNAP’s ($SNAP) stock traded below $5.00 a share. SNAP, the parent company of social media app Snapchat, had been a publicly traded company for 21 months up to that point. In those first 21 months, SNAP’s stock spent 17 months trading below its IPO price. As a public company, things weren’t going well for SNAP and its leadership.
But December 2018 would mark the low for SNAP. Later on, the company would release its baby face filter, which became extremely popular across social media and television, and the stock price would rebound.
Where it Started to Fall Apart
October 21, 2021, SNAP reported $1.07 billion in revenue during the third quarter of 2021, a 57% year-over-year increase in revenue, but $30 million below analyst’s estimates and below the low-end of the company’s own revenue guidance. The reason behind the revenue miss was Apple. Apple's upgraded software to its iPhone line, prevented digital advertisers from tracking users without their consent. SNAP’s stock price would fall 23% after the earnings release.
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What Could Spark Its Recovery
Before the announcement in May that alerted investors to the company’s struggles in the current economic environment, SNAP’s stock was trading close to $23.00 per share. Now trading at just under $15 per share, the stock could see an increase if the company is able to meet the low expectations the market has for it. Analysts have revised their full year earnings per share expectations for SNAP down from $0.50 cents a share to $.22 per share. If June 22, 2022 was the market low, and the stock market and global business activity stabilizes over the next five months, Snap could meet and possibly exceed analyst's estimates.
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Snap also has youth on its side. Over the last year, Meta’s failure to attract younger users to its platform has been well documented, but that’s not a problem for SNAP. According to Sprouts Social, 48% of Snapchat users are between 15 and 25 years old. Snapchat has been the social media platform of choice for Gen Z (people born between 1997 and 2012). A Wunderman Thompson report puts Gen Z spending at almost $100 billion, and that doesn’t include the impact that the younger Gen Z members have on their parent’s spending. In comparison, Millennial spending is only $65 billion. If brands want to get their products and services in front of Gen Z, Snapchat is one of the best places to do it.
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