This is a step-by-step stock review to answer the question, is Snapchat (SNAP) stock a good buy?
This article will teach you how to use the 4Ms of investing. This will be a detailed walkthrough to show you how the 4Ms work and why they are important. If you are interested, you can log into Tykr to use the 4M Confidence Booster (Powered by OpenAI) which will allow you to complete a 4M Analysis in less than 60 seconds.
What are the 4Ms?
- MOS (Margin of Safety) – The MOS is the math part of investing which includes the Summary, Score, and MOS (Margin of Safety).
- Meaning – The meaning is the business model and how scalable the revenue streams are.
- Moat – The moat is how the business compares to other companies in the same Sector and Industry.
- Management – The management is the track record of the CEO.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
Table of Contents
The following links will direct you to key topics to help answer the question, is Snapchat (SNAP) stock a good buy?
1. Snapchat Company History
- Founded in 2011: Snapchat was created by Evan Spiegel, Bobby Murphy, and Reggie Brown while they were students at Stanford University.
- Headquarters: Based in Los Angeles, California, Snapchat is operated by Snap Inc., a technology and social media company.
- Innovative Launch: Snapchat initially gained attention for its unique feature of disappearing messages, which offered a novel approach to social media communication.
- Key Features: The app introduced popular features such as Stories, Filters, and Lenses, which revolutionized how users share and interact with visual content.
- Public Offering: Snap Inc. went public in March 2017, trading on the New York Stock Exchange under the ticker symbol SNAP.
- Global Reach: Snapchat has grown into a major social media platform with millions of active users worldwide, appealing primarily to younger demographics.
- Ongoing Evolution: The company continues to innovate with augmented reality (AR) experiences, new content formats, and partnerships to enhance user engagement.
- Monetization: Snap Inc. generates revenue through advertising and premium features, focusing on integrating ads seamlessly into the user experience.
2. MOS (Margin Of Safety)
When investing in a company, the first step is to look at the financials. Fortunately, Tykr does this for us automatically. The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make.
- Summary: Overpriced
- Score: 17
- MOS: 1%
To see the most up-to-date Summary, Score, and MOS, please log into Tykr.
3. Meaning
When investing in a company, it’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.
Here is how Snapchat makes money:
- Advertising Revenue: Snapchat makes money primarily from advertising, offering various ad formats like Snap Ads, Story Ads, and sponsored filters to businesses.
- Sponsored Lenses and Filters: They earn revenue by creating and selling branded augmented reality (AR) lenses and filters for companies to use in their marketing campaigns.
- Snapchat Discover: The platform monetizes through partnerships with media companies and content creators who produce and distribute content on Snapchat Discover, generating ad revenue.
- Promoted Stories: Businesses pay to have their stories promoted to reach a wider audience within the app.
- Geofilters: Snapchat earns from custom geofilters that users can purchase for events and locations.
- Subscription Services: The company is exploring subscription models and premium features for users, providing additional revenue streams.
Here are a few of the other companies that Snapchat has acquired over the years. This is important because a company will use a “Buy before build” philosophy to go to market faster and add additional streams of revenue. A company with more revenue streams has a more stable business model. Keep in mind, that most companies don’t build new software because it takes too long to go to market and generate revenue.
- Zenly
- Fit Analytics
- Pry Financials
4. Moat
When investing in a company, it’s important to understand how a company ranks against other companies in the same sector and industry. Based on the Score, here is how Snapchat stacks up against other companies.
- Yelp Inc.YELP – 78
- Spotify Technology S.A.(SPOT) – 61
- Fiverr International Ltd.(FVRR) – 61
- Similarweb Ltd.(SMWB) – 56
- Autohome Inc.(ATHM) – 50
- Snap Inc.(SNAP) – 17
To see the most up-to-date Summary, Score, and MOS and each stock, please log into Tykr.
5. Management
When investing in a company, it’s important to understand who the CEO is, what they have accomplished in the past, and how they have helped this company grow. Good leaders typically have stronger cultures, less turnover, and better returns in the stock market.
- Founded Snapchat: Evan Spiegel co-founded Snapchat in 2011, establishing a new social media platform with innovative features like disappearing messages.
- Introduced Stories: He pioneered the Stories feature, which became a widely adopted format across multiple social media platforms, revolutionizing how users share content.
- Developed Augmented Reality (AR) Lenses: Spiegel led the development of AR lenses and filters, enhancing user engagement and setting Snapchat apart with interactive visual effects.
- Expanded User Base: Under his leadership, Snapchat grew its user base to hundreds of millions, becoming a major player in the social media landscape.
- Publicly Traded: Spiegel successfully led Snapchat’s initial public offering (IPO) in March 2017, making it a publicly traded company on the NASDAQ.
- Innovated with Discover: He introduced Snapchat Discover, a platform for media companies and content creators, providing users with curated content and driving advertising revenue.
6. 4M Score
All of our homework on this company leads up to the 4M Score. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the Meaning, Moat, and Management. If all 4Ms pass, we should have high confidence in buying this stock.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
👉 The 4M Score of Snapchat (SNAP) is 42/100.
To see the most up-to-date 4M Score, please log into Tykr.
7. Is Snapchat (SNAP) stock a good buy?
Some of the top questions investors can have is Snapchat (SNAP) stock a good buy or should I buy Snapchat (SNAP) stock?
Snapchat (SNAP) presents an intriguing investment opportunity with several strengths. As a pioneer in ephemeral messaging and augmented reality (AR), Snapchat has built a unique platform with features like Stories and AR filters that engage millions of active users daily. The company has successfully leveraged these features to attract advertisers, driving substantial revenue growth.
Snapchat’s innovation in AR and its focus on expanding user engagement and content offerings also position it well for future growth. Strategic partnerships and new ad products continue to enhance its appeal to brands and advertisers.
However, there are risks to consider. Snapchat faces intense competition from other social media platforms and is heavily reliant on advertising revenue, which can be affected by economic downturns. Additionally, the company has experienced periods of financial volatility and slow user growth. While Snapchat offers strong growth potential due to its unique features and ad innovations, investors should weigh these risks when considering an investment.