Woe to those who left Snap Inc (NYSE:SNAP) for dead. After almost two years of an extended trend downward, SNAP stock has revitalized itself and turned a corner.
There was a time when investors who were long SNAP stock were embarrassed to discuss this holding publicly, as so much disdain was held for this particular tech stock. There were a series of missteps in the early days that led to SNAP stock price plummeting shortly after its IPO pop. User growth deceleration, a voting structure that was very unfriendly to shareholders, issues with its Android app, and subsequent executive departures all contributed to SNAP stock price dropping more than 50% and trading down to $5 a share.
But those same owners of Snapchat stock are the ones standing tall now. SNAP stock price is up over 165% this year.
The shares have been on a huge run, rivaling the performance of recent IPOs. With a number of new services including Snap Games and original premium content directed specifically at mobile-device users, it looks like the best is yet to come for Snapchat stock.
Where SNAP Is Now
With 190 million Daily Active Users (DAUs), it would be a mistake to dismiss SNAP as a fad. The user base skews quite young, but that highly targeted audience is the proverbial nectar for the bees that are advertisers.
Snapchat reaches 90% of all 13-24 year-olds and 75% of all 13-34 year-olds in the U.S.
Even though SNAP has a disadvantage to the likes of Facebook, Inc. (NASDAQ: FB) in terms of advertising capabilities, that has changed markedly with the improvement of its interface and incremental technological upgrades.
SNAP has successfully upgraded and enhanced its Ads Manager to make it more friendly to marketers. Features like target- cost bidding, bulk uploading capabilities, bulk editing and cloning, and the expansion of location categories to the U.K., Canada, and France are all major steps that will ultimately improve its top line. Additionally, its Reach & Frequency product now allows for one-day ad buys (the previous minimum was three) and has similarly undergone geographic expansion.
These are all extremely positive signs.
An example from SNAP’s first-quarter earnings conference call shows that the company is attracting huge advertisers:
“Toyota Motor Corp (NYSE:TM) ran a sophisticated campaign across our various video and AR products to promote the Corolla Hatchback among Millennials. Snapchatters engaged with the ads, watching more than 90% of their Commercials on average, and playing with their Lenses for more than 10 seconds each on average.”
SNAP’s New Products Will Drive Monetization
There is a lot of potential in the new slate of Snap Originals, the company’s premium, mobile shows created exclusively for Snapchat’s audience. SNAP now offers more than 450 premium content channels worldwide and in the first quarter, launched over 50 new Shows and Publisher Stories in international markets.
The premium content and Snap Games will continue to bring users back to the platform, increasing their stickiness and making SNAP more than just a camera-centric company. More importantly, new products mean new monetization opportunities e.g., video advertising.
The Bottom Line on SNAP Stock
A lot of people, especially those over 30, are still inclined to dismiss SNAP as a fad for youngsters. However, there are pockets of value within a company that has worked through a lot of its initial missteps.
There is so much room to monetize SNAP’s captive and targeted user base, and it looks like the company is finally showing signs of doing so by improving both the product side and the advertising platform. Those trends will definitely be positive for SNAP stock.
As of this writing, the author did not own shares of any of the stocks named.
