The stock prices of technology companies and social media firms are under huge attention in recent times. If the company combines both directions, like Snapchat, it is doomed to be under the scrutiny of serious investors. GBC Time continues to review the most interesting financial news, now describing the situation with Snap stocks and forecasts price changes for the future.
Introduction to Snapchat stock
Traditionally, when the company makes an Initial Public Proposition (IPO) and enters the stock exchange, its development and the financial balance falls under a magnifying glass of global investors. A similar story happened to Snapchat Inc., which decided to become a more public firm at the beginning of 2017. Since that time, the company has faced serious downfalls and significant rise, while now it is receiving vast attention due to good performance even during the crisis.
Snapchat before the IPO
The company Snapchat Inc was founded in September 2011 by three persons: Evan Spiegel, Bobby Murphy, and Reggie Brown. However, the latter sued the firm in two years as he was sent away from the company’s ruling possibilities. The lawsuit lasted more than a year, and in September 2014, the sides dealt a $157 million payment for Brown for his initial contribution. Since that time, Spiegel and Murphy have been the major stakeholders of the firm.
The development of the innovative mobile application was attracting the interest towards the company from the side of investors and even huger market players. While the company was raising venture capital in the first years of its existence, huge market players turned their attention to Snapchat. Thus, Spiegel and Murphy denied a $3 billion bid from Facebook in 2013. The same year later, Google suggested $4 billion to Snapchat owners, but they refused the deal once again.
As the stakeholders had three companies – Snapchat, Spectacles, and Bitmoji – they decided to rename the corporation into Snap Inc., which included all three technological decisions. This step opened the way to make an IPO in the following year, and the firm was coming to the stock exchange having a valuation of more than 20 billion dollars.
Snapchat stock price: historical timeline
The first information about the initial public offering appeared at the end of January in the Wall Street Journal. Even though only part of the predicted conditions was approved, the famous financial and news outlet was quite right concerning Snap Inc.’s appearance on the stock exchange.
The IPO was made on March 2, 2017, on the New York Stock Exchange, and the company evaluated itself at $24B, with the opening price on the first day being $24 per share. The positive dynamics lasted only a few days, and since March 6, the prices went down, with bought volumes decreasing from hundreds of millions to dozens of millions of dollars.
The downfall lasted a couple of months, with the lowest point on July 8, when the trade closed at the level of $11.8 per share. A quite stable period lasted until January 29, 2018, when the company announced a redesign. However, the splash up to $20 per share wasn’t long. The increasing number of unhappy users with the new design started the long-lasting downfall, which bottomed at the end of 2018 with lower than $5 per share. Quarter losses accompanied all these periods.
Being a unique social media with interesting features like disappearing content and smart live filters for cameras, the company was a pie for bigger companies. Nevertheless, they chose the independent way and suffered a lot because of such a decision. Thus, their negative results in 2017-2018 are often linked to Facebook’s aggressive tactics of implementing Snap’s unique features in Instagram, which was bought in 2012 by Zuckerberg’s media giant.
Nevertheless, the company showed stable growth in the first half of 2019 and topped the stock price at the level of $18 per share at the end of July. The growth was the outcome of introducing camera filters that became available for mobile devices and desktops, including iOS, Android, and Microsoft-driven ones.
SNAP stocks during the crisis
However, the middle of autumn 2019 was a bit disappointing as the company struggled and dropped share prices down to $13.5 after the quite successful first half of the year. Nevertheless, SNAP stocks re-gained $19 at the beginning of 2020. The corporation adjusted the process of cooperation with advertising firms in 2019, allowing them to easily deal with the Snapchat ads manager, which actually played a significantly positive role in the upcoming year.
As for most businesses, the beginning of 2020 was positive, but then the unfortunate news from China increased vulnerabilities on the stock exchanges. The middle of March became the black period for most companies, and Snap Inc. also struggled with the lowest price of $10 on March 16.
Nevertheless, the recovery process started fastly as the total lockdown forced people to entertain and speak a lot from a distance, and Snapchat became one of the most popular applications. Engaging camera filters and disappearing content weren’t something new, but people reinvented the interest in those features during the pandemic. This led to a stable increase in the number of users in the application, and advertisers started gladly cooperate with Snap Inc., which was ready for the fast launch of marketing programs.
It even led to the increase of shares in the first half of July up to $25.5 – the highest point since IPO. However, there was some period when the market and company were adjusting to the new reality and growing popularity of Snapchat with dropping prices to $21.6 in the middle of August, SNAP stocks skyrocketed since that time. Of course, some fluctuations took place, but the tendency is extremely positive, and at the beginning of February 2021, the prices overcame $55 point. Snapchat entered the list of the companies that benefited from coronavirus significantly.
The timeline of breakpoints in SNAP stock price is presented in the following chart:
Key elements that influence SNAP stock price
Snap Inc’s history is unique, but it shows a quite understandable pattern of what influences the stock prices of social media companies. Even though the Snapchat application is quite a niche product with a primary target audience under 30, the core reasons that influenced the capitalization of the firm are predictable:
- Competitors
- Innovations
- Coronavirus
- Staff movements
Competitors
Although competition is the inevitable aspect of every adequate market, for Snap Inc., it was a significant barrier at some point. Purchasing bids of Google and especially Facebook showed the value of Snapchat, and the refusal led to another competitive component – the implementation of one’s unique features. Thus, the Facebook-owned Instagram implemented Augmented Reality (AR) camera filters and disappearing stories, which were the development of Snap Inc. Those elements significantly hit the original developer’s profits that had to create something new to continue growth. The issue of patents and copyrights should be discussed by professionals in this case.
Being a quite niche product with a focus on young audiences, Snapchat faced serious competition from the Chinese-developed TikTok, which also skyrocketed during the pandemic. So, before purchasing the regarded company’s stocks for the long term, try to be aware of the competitors as they can significantly hit the forecasted revenues.
Innovations
Even though the primary capital of Snap Inc. is the Snapchat app, innovative products often make a difference. Thus, one of the corporation’s major products is smart glasses Spectacles, which are connected to Snapchat accounts and make the entertaining process faster and easier. The release of a new version is always a shaky element to the whole firm as the successful device can boost other related products.
Nevertheless, this sector is also under the pressure of AR-driven similar products, and the competitor’s breakthrough can significantly hit the value of Snap Inc. Despite the fact that being aware of the upcoming innovations is one of the major rules for investors, social media can be closely related to innovations.
Staff movements
One of the darkest periods in Snap Inc.’s history was directly related to the Facebook cheating tactics of implementing Snapchat features in Instagram (however, Facebook ads manager was introduced much earlier than Snap’s one). However, this period was also related to the departure of a large number of top-management staff. It’s hard to determine surely if those two aspects were interrelated, but significant changes in the working team aren’t the best signal anytime (it shows a difficult situation at the moment or serious hiring problems in the past).
Taking into account the total power of Evan Spiegel and Bobby Murphy as only owners, one has to remember that SNAP shares aren’t giving any voting power for the investor, so all the changes, including staff, can be unpredictable.
Snapchat stock forecast for 2024
The issue of predicting the companies’ stock prices is always a tough one as there is a little correlation between the historical trends and real numbers in the future. Of course, some of the tendencies can be easily seen and may be confirmed in some period, but the news and reality always have a stronger impact on the upcoming prices.
For instance, the impact of COVID-19 was immense on the shares’ prices in 2020, and the total downfall showed a severe financial crisis. However, even the dangerous disease with all the adverse outcomes boosted some of the companies and goods. GBC Time has already informed about the growing price of Tesla stocks and described the reasons for such an increase, nothing to say about the cryptocurrency market with tripled revenues for major market assets like Bitcoin and Ethereum.
In terms of a popular social media Snapchat, the forecast for 2024 is generally positive. As we mentioned above in the reasons that can influence the cost fluctuations, even the effective vaccination can boost the product. Of course, one has to follow the latest news related to finances and Snapchat before going and buying their shares. Thus, the company showed better financial results in the last quarter and overcame expectations in terms of new customers’ numbers and net worth.
Is Snap Inc. stock worth buying in 2024?
What do those losses mean for investors? The experienced ones know how net losses go in parallel with the increase of share prices. It just means that receiving some dividends from holding SNAP stocks isn’t possible in the nearest quarters, so buying shares should be regarded as the investment option that can benefit if speculating with them. Buy low, sell high – the only interesting option that can be made with Snap Inc. shares in 2024. Nevertheless, if one wants to receive dividends from investing in Snapchat, he or she has to wait until 2023 or even longer.
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