It’s taken awhile – too long, actually, thanks to a horrendous misfire – but Snap (NYSE:SNAP) stock is finally on the right track.
The once also-ran of social media stocks is up 41% on a year-to-date basis, and a whopping 203% since hitting a mid-March trough.
More importantly, the owners of the popular Snapchat app seem to have finally found a viable plan to set it apart from Facebook (NASDAQ:FB), Instagram, Tiktok, and other social media platforms.
That in itself makes Snap a much more interesting company for investors, and worth serious consideration these days as a legitimate growth stock.
SNAP Stock by the Numbers
Snap started rebounding in mid-March as the stock market began its recovery from the novel coronavirus scare. It really began taking off in April, when SNAP reported its first-quarter earnings.
The financials were better than expected, as revenue of $462.48 million beat analysts’ estimates of $431.43 million. Adjusted earnings ended up being a loss of 8 cents per share, which was slightly less than expectations of a 7 cent loss per share.
What got people excited, though, was Snap’s daily user growth. Daily active users in the first quarter topped 229 million which was a 20% year-over-year improvement.
Snapchat Discover, which is essentially a news feed featuring content from news publishers and brands, also saw a huge increase. Daily time in watching Discover content grew 35% on a year-over-year basis. Among people older than 35, total daily time doubled on a year-over-year basis.
CEO Evan Spiegel attributed the jump to more relevant content on the Discover platform, as well as information about the pandemic. In doing so, Snapchat is taking on an important content role in addition to being a place to post fun videos with filters.
We have also published over 700 Discover editions featuring up-to-the-minute coverage on COVID-19 from our content partners, our in-house news teams, and agencies like the CDC and WHO. With more than half of the United States’ Gen Z population watching news content on Discover, we feel it is particularly important for us to educate our audience with curated and trustworthy information during these critical times.
Snapchat’s Continued Evolution
Snap has come a long way from 2018, when it launched an ill-advised redesign that caused it to lose 1 million daily active users and lose ad revenue. Engineers scrambled to come up with a fix, but the damage was done to SNAP stock.
Snap is continuing to look for ways to innovate, and one path forward is actually charted by one of its biggest investors.
Chinese tech company Tencent (OTCMKTS:TCEHY) owns 12% of SNAP stock. It also owns WeChat, which is the biggest messaging app in China, with more than 1.2 billion monthly active users. Not surprisingly, Snap is looking closely at the WeChat model as it looks for ways to stand out from other U.S. social media platforms.
The latest idea are minis, or lightweight web apps that are housed inside Snapchat and complement its core attributes. A mini can be used to let friends do an activity together, like study. “One of the things that’s so unique about minis is that they provide these shared experiences with friends,” Spiegel told The Verge.
Mini apps were a $115 billion business for WeChat in 2019, and 300 million people are monthly mini app users on the WeChat platform. There’s definitely money to be made for Snap.
Snap already has a built-in audience. The company says 100 million people have tried Snap Games and the average user plays for 20 minutes a day. People that are familiar with Snap Games should be more inclined to at least give minis a try.
The Bottom Line on SNAP Stock
Minis are a pretty exciting opportunity for SNAP investors. If Snapchat is able to successfully copy WeChat and use minis to develop a payment processing feature, then Snap would legitimately become an e-commerce company as well as a social media stock.
E-commerce stocks are becoming increasingly important as the globe transitions to a cashless society. And when you couple with the revenue possibilities of minis, plus throw in Snapchat’s growing user base, you come up with a company with an exciting growth story.
It just took a little longer than everyone anticipated.
SNAP stock has a buy recommendation in my Portfolio Grader, where it has a “B” grade right now.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.