Why Snap, the Maker of Snapchat, Keeps Rising?

Dear Reader,


Snap Inc., the maker of the Snapchat video chat application, has enjoyed a significant rise in its stock market price since 21 December 2018, when was the last major trough of the US stock markets measured by the main indices DJIA, S&P 500 and Nasdaq Composite.

Why? The first reason that comes to mind is that Snap's stock market price rise is a byproduct of the rising prices of US stock markets since December 2018. But there seems to be a deeper reason. Snap's stock is currently priced at 15.61 USD a bit more than half than the 27.09 USD at which Snap made its public debut on the 3rd of March2017. Then Snap was marketed as the new Facebook and the US market did price it in this fashion valuation wise  for a short while. Then Snap's stock market price crashed to 4.99 USD on 21 December 2018.

So what is driving the current increase in Snap's market capitalization. In my opinion, the revenue rising by more than 30% in the last quarters year on year is the main reason for Snap's improving prospects. Snapchat's user growth has somewhat stalled or is growing slowly, but Snap Inc. is monetizing very successfully its platform. As far as I know, Snap charges for advertisements less than Facebook or with other words Snapchat is somewhat of a discounter. This strategy seems to work well for increasing revenue. And since Snapchat is basically an application, its business model is highly scalable. As long as Snap keeps growing revenue briskly by something like more than 20% year on year quarterly growth the company could soon become profitable. Which is what investors ultimately like. Wall Street too.

So for now it is still not clear if Snap will become the new Facebook, but Snap is on a growing trajectory, in terms of revenue, at least. As long as that continues, Snap's stock price could keep rising, barring a stock market crash.

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Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

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Respectfully yours,

Petar Posledovich