Snapchat is a popular social media app that allows users to share photos, videos, and messages that disappear after being viewed. The company behind the app, Snap Inc., went public in March 2017 at an IPO price of $17 per share. Since then, Snapchat’s stock price has seen ups and downs as investors continue to evaluate the company’s potential for future growth and profitability.
What is Snapchat?
Snapchat is a mobile app developed by Snap Inc. that allows users to share photos, videos, and messages called “snaps.” Snaps can be viewed for a set amount of time (typically 10 seconds) before they disappear from the recipient’s device. The ephemeral nature of snaps gives Snapchat a unique, fun, and spontaneous feel compared to other social media platforms.
Some key features of Snapchat include:
- Stories – Photos and videos shared to your Story remain viewable for 24 hours by all your Snapchat friends.
- Lenses – Fun augmented reality lenses and filters that can be added to snaps.
- Discover – Watch curated content and stories from media publishers, brands, celebrities, and more.
- Chat – Have ephemeral conversations with friends through one-to-one or group messages.
- Snap Map – View snaps and stories from events and locations around the world.
Since launching in 2011, Snapchat has grown to become one of the most popular social networks worldwide, especially among young smartphone users. As of 2022, Snapchat has over 363 million daily active users.
Snap Inc.’s Financials
Snap Inc., Snapchat’s parent company, has seen its revenue grow significantly in recent years, but the company has struggled to become profitable:
- 2022 Q3 revenue: $1.13 billion, up 6% year-over-year
- 2022 Q3 net loss: $360 million
- 2021 annual revenue: $4.1 billion, up 64% year-over-year
- 2021 annual net loss: $488 million
The majority of Snap’s revenue comes from advertising. Snap places ads between stories and monetizes its lenses and filters. While revenue has increased substantially, the company’s net losses underscore the challenges Snapchat faces on its path to profitability.
Snapchat’s Stock Price History
Let’s take a look at how Snap stock has performed since its IPO:
| Date | Event | Stock Price |
|---|---|---|
| March 2, 2017 | IPO at $17 per share | $17.00 |
| March 3, 2017 | First day of trading | $24.48 |
| September 25, 2017 | Hits all-time high of $29.44 | $29.44 |
| December 21, 2018 | Hits all-time low of $4.99 | $4.99 |
| October 10, 2022 | Closes at $10.79 | $10.79 |
Snap saw its share price surge 44% during its first day of trading to over $24 per share. However, the stock failed to maintain this momentum. It hit an all-time high of $29.44 in late 2017 before declining steadily over the next year. By December 2018, Snap stock had fallen over 80% from its peak to dip below $5.
In 2019 and 2020, Snapchat made progress growing its user base and revenue, which helped lift its stock back into the $15-20 range. More recently in 2022, a weakening digital ad market has weighed on Snap’s stock price. As of October 2022, Snap trades around $10 per share, about 40% below its IPO price.
What Drives Snapchat’s Stock Price?
Some of the main factors that impact Snap’s stock price include:
- User growth – Snapchat’s ability to grow and engage its user base. Daily active users drive Snap’s revenue potential.
- Revenue growth – Growth in advertising and other revenue channels. Investors want to see Snap monetizing its users more effectively over time.
- Profitability – Progress toward achieving sustainable profit margins. Currently Snap is unprofitable.
- Innovation – New products and features that differentiate Snapchat. Keeping the app fresh and relevant for users.
- Competition – Threats from rivals like Instagram and TikTok stealing market share or mimicking features.
- Macro trends – The overall digital advertising market and economy. Snap is vulnerable to ad spending slowdowns.
By focusing on these core areas, Snapchat aims to build its case as an attractive investment and boost its valuation over time.
Snapchat Stock Price Forecast
Making stock price predictions is an inexact science. Snapchat’s future share price will depend on many complex internal and external factors. However, analysts attempt to estimate how Snap’s stock could perform based on its business trajectory and market conditions.
Short Term
In the near term, analysts expect Snapchat’s stock to remain under pressure:
- Average 12-month target estimate: $13.43 (Refinitiv)
- Highest estimate: $20.00
- Lowest estimate: $8.00
Snap is contending with a deteriorating advertising market and stiff competition from TikTok. Profits also remain elusive. These headwinds have analysts cautious about Snap’s prospects over the next 6-12 months, suggesting limited upside from current levels.
Long Term
Over the long run, analysts are more optimistic as Snapchat’s investments in augmented reality, ecommerce, and content creation could pay off:
- Average 5-year price target: $41.05 (CNN)
- Highest estimate: $65.00
- Lowest estimate: $24.00
If Snapchat can maintain strong user and revenue growth over the next several years while making progress toward profitability, analysts see significant upside potential. However, Snap’s future remains highly uncertain.
Key Takeaways
- Snapchat parent Snap Inc. went public in March 2017 at a price of $17 per share.
- The stock has been volatile, reaching a high of $29.44 later in 2017 before declining over 80%.
- Snapchat currently trades around $10 – $11 per share.
- Near term headwinds likely limit upside, but long term growth prospects could boost Snap’s valuation if executed well.
- Ultimately, Snapchat’s stock price will be driven by the app’s user growth, revenue trends, profitability improvements, and overall competitive position over the long term.
Conclusion
In summary, analysts are cautiously optimistic that Snapchat parent Snap Inc. can enhance shareholder value over the long term if it continues growing its user base and revenue while controlling costs. However, significant risks and uncertainty remain around Snap’s growth prospects, competitive threats, and path to profitability. While Snapchat’s stock could deliver substantial returns if execution goes very well, the investment also carries downside risk if headwinds persist. Snap’s future stock price range could remain wide given these unpredictable factors.