SNAP: Say Cheese! Taking a Cautious View On A "Camera Company". Initiate with a SELL
​Ah Snap! Considered a social media disruptor by some, Snap (SNAP) considers itself a camera company with the mission to reinvent the camera and how people communicate. Snap standouts in revenue growth, daily users, and the number of 18-24 years olds who use the product, relative to its social media peers. However, there is a minimal barrier to entry for competitors and Facebook has already encroached into its territory by copying Snap’s features for its platform. With a far larger user base and far deeper pockets, Facebook can potentially derail Snap’s rocket growth by taking users and advertisers as well decrease ARPU with more offerings and user engagement tools. In addition, our checks with advertisers have indicated though warming up to Snap, they are still hesitant in terms of fully spending with Snap given uncertainty regarding ROI and errant positioning of their ads with wrong content. Despite an impressive (short) track record, we launch with a SELL and $17 price target (using Facebook’s multiple of 8.4x Snap’s 2018 sales of $2B) as Snap is the richest in valuation in the space and us taking a wait-and-see approach for the time being due our concerns outweighing our positives, including Snap’s heavy investment mode outlook.
Summit Insights Group LLC (SIG), founded by Srini Nandury in 2018, is a fundamentals-driven, technology-focused, equity research boutique. SIG analysts cover Semiconductors, Semicap Equipment, Enterprise & Application Software, and IT Hardware & Storage companies. The firm also provides insight into adjacent areas such as Mobile and Internet Technologies.
SIG provides deep, rigorous technology and financial analysis, unlike Wall Street analysis that is mainly driven by financial models. SIG principal analysts are known for their extensive industry experience, which we believe is essential to evaluate technology industry stocks. Each principal analyst has at least 5 years of hands-on industry experience prior to their tenure in equity analysis. SIG analysts are known for making non-consensus prescient stock calls.
SIG analysts follow more than 100 stocks regularly in the areas of Enterprise and Application Software, Storage, Networking, Security, Flash Memory, Big Data, Storage Networking, SSD and Processors. SIG analysts have access to the managements of both public and private companies to verify factual items from public comments or published statements, buttressing the integrity of our analysis. SIG analysts regularly attend industry conferences and visit startup companies to understand technology trends driving the industry. SIG is not a broker dealer, hence it does not have investment banking or trading conflicts. At SIG, we value integrity, our client interests and confidentiality above all else.
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