Is Snap a buy?

It’s time to revisit a social media giant. Here is the breakdown on $SNAP, otherwise known as Snap.

Current Price: $58.9

52/Wk High: $73.59

52/Wk Low: $12.44

Market Cap: $88.9 Billion

Read below for the breakdown!

Snap ($SNAP) is a social media and communications company that owns and operates Snapchat, a popular social media and communication platform.

Taking a look at Snapchat, the platform averages 265 million daily active users (DAUs) and maintains over 75% usage within the age bracket of 13 through 34.

As for upcoming additions, Snap has been expanding into augmented reality, providing more camera features to the app. It is important to note that Snap generates a majority of its revenues through digital advertising on the Snapchat platform.

Of recent, Snap has performed well within the markets, rising just over 17% throughout the past three months and 355% within the past year, leaving investors to wonder if Snap is still a buy.

Sifting through Snap’s stock price according to TREFIS (@trefis), 66.2% of the stock price is based on Snap’s North America Advertising segment.

Furthermore, 31% is based on the International Advertising segment and 2.7% is based on Cash.

Digging into the numbers Snap beat Q4 2020 expectations with an EPS of $0.09, better than the analyst’s EPS consensus estimate of $0.07. On a year over year basis, EPS improved by 200%.

Revenues improved significantly as well, increasing by 62% year over year to a strong $911 million. For comparison, Q4 2019 revenues totaled $560.888 million.

Along with revenues, operating cash flows improved by 21% year over year to a better $-53 million. For comparison, operating cash flow increased by $14 million from the Q4 2019 level.

Free cash flow also improved, increasing by $7 million to a better $-69 million, but is still unfortunately negative.

Snap continued to run an operating loss, with the Q4 operating loss totaling $-97.236 million. On the flip side, the operating loss is significantly less than the Q4 2019 loss of $-253.596 million.

Net loss also improved, with net loss totaling $-113.099 million, much better than the $-240.704 million net loss in Q4 2019.

Adjusted EBITDA skyrocketed by 291% year over year to a stronger $165.609 million. For comparison, the Q4 2019 adjusted EBITDA totaled $42.307 million.

Rounding out Q4 2020, Daily Active Users (DAUs) jumped by 22% year over year to a stronger 265 million DAUs. It is important to note that DAUs increased in North America, Europe, and the rest of the world.

Management was upbeat.

“We delivered our first full year of Adjusted EBITDA profitability and, as we look towards the future, we’re excited to build on our investments in augmented reality, mapping, and content to drive our ongoing growth,” CEO Evan Spiegel said.

As for guidance, management expects Q1 2021 revenues to land within a range of $720 million to $740 million, much higher than Q1 2020 revenues of $462 million.

Furthermore, Adjusted EBITDA is expected to land within a range of $-70 million to $-50 million, a significant improvement from the Q1 2020 level of $-81 million.

Shifting into the balance sheet, the numbers are solid.

Total Debt: $1.675 Billion

Total Liabilities: $2.694 Billion

Total Assets: $5.024 Billion

Cash & Short Term Inv: $2.538 Billion

On a valuation basis, Snap does trade at a premium.

Forward P/E: 101.24x

Price to Sales: 38.44x

Price to Book: 39.01x

Management could be more effective.

Return on Equity: -41.17%

Return on Assets: -20.91%

Return on Invested Capital: -24.01%

Given the numbers, the analysts are bullish with a mean price target of $78.34/share, representing a 31.65% upside.

The high price target is $100.00/share, representing a 68.05% gain, while the low price target is $40.00/share, representing a -32.78% downside.

The big money is quite involved as well with 59.92% of Snap being owned by institutions. Top holders include T. Rowe Price Associates, The Vanguard Group, and Morgan Stanley Investment Management.

On a technical basis, Snap could be presenting an opportunity. According to the six-month charts, the MACD is moving to the upside with slowing momentum within a range of 1.12 down to 0.4932.

The six-month charts are also indicating an RSI of 51.45 and CCI of 40.1, both of which are now trending to the downside.

In short, Snap ($SNAP) is an interesting social media play, with expanding revenues, a growing user base, and an addicting communications aspect.

EAT - SLEEP - PROFIT

Disclaimer: This is not direct financial advice, simply an opinion based on independent research.