When will Snapchat go public?

Snap stock is making a comeback: so are the reasons

February was an exciting month for all followers of Snapchat stock. The Snapchat operator Snap was able to convince for the first time on Wall Street after the company burned significantly less money than expected and won a surprising number of users for its Snapchat app. Snap shares then rose just under 30% in February alone.

Many investors are wondering whether the soaring will continue and whether the social media company will make a comeback similar to that of Facebook, whose shares also crashed after the IPO.

Snap Stock Up - The Reasons

At this point, it is good for investors to know why some analysts are suddenly believing in Snap aka Snapchat again and are screwing up their price targets. Snap still posted heavy losses ($ 350 million) in the most recent quarter, but user and revenue growth picked up pace. Snapchat gained a total of 8.9 million active users, with an average of 189 million users worldwide using the Snapchat app every day in the most recent quarter.

User growth is important for Snapchat, and potential revenue depends on it - these recently climbed 72% to US $ 285.7 million. Investors need to know that Snap generates almost all of its revenue from mobile ads that appear on Snapchat.

Snapchat introduces automated advertising platform

Here, Snap managed to establish an automated auction system for free advertising space in the fourth quarter, which means that advertising marketers can place advertisements in Snapchat much more easily and, above all, more cheaply.

This has resulted in more than 90% of Snap advertisements being acquired programmatically via the auction system in the most recent quarter, which means that although advertising prices have fallen, Snap has been able to sell more advertising partners and, above all, more advertising space.

The bottom line is that average revenue per user climbed 46% to $ 1.53, while costs per user only increased 2% to $ 0.98. This shows: Snapchat's business model seems to be working.

New designs don't go down well everywhere

In order to get even more users excited about the Snapchat app, Snap had given its popular app a new design in mid-February - this should make Snapchat easier to use for older users.

Immediately, however, resistance from the younger generation arose, for example Snapchat stories will in future be displayed in the news feed under private snaps and no longer chronologically as was previously the case. The new design looks unusual at first, which immediately created resistance in the network. Celebrity star Kylie Jenner was just as mobile against the update via Twitter, as was a petition on Change.org that calls for the update to be dismantled and has so far been able to collect more than 1.2 million signatures.

But as it now turns out, the update, which also caused the Snap share price to crash briefly, was less damaging than initially feared. According to the app analysis company App Annie, the download numbers for the Snapchat app remained strong even after the update: Messenger continues to be one of the top 10 most popular apps in the Apple iOS App Store as well as in the Google Play Store.

Bitmoji app - Snap's secret weapon?

Additionally, investors need to know that Snapchat isn't the only big app that Snap runs. After the takeover of Bitstrips in 2016 for around US $ 64 million, the avatar app Bitmoji is also part of the group. Via the Bitmoji app, every user can create a cartoon version of himself and exchange it with other users.

A total of 1.9 million avatar options are available to users. The app seems to be particularly popular in America, where Bitmoji can regularly be found in the top 10 of the download charts and has been the fastest growing app in America in recent years (source: comStore).

Conclusion: Snap is more than just Snapchat

Snap is much more than just Snapchat. With Bitmoji, Snap has a promising app in addition to Snapchat that needs to be monetized. Whether Snap succeeds in this remains to be seen. Either way, Snap made an amazing comeback in the most recent quarter that gives hope for more. Despite all the euphoria surrounding Snapchat and Bitmoji, investors must also note that Snap continues to write deep red numbers.

This is unlikely to change in the next two years, if the analysts' estimates are to be believed. Those interested in Snap have to have a lot of staying power and a lot of risk awareness if they want to be part of the possible success story.

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