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Snap Has The Lowest Market Value Per User: Profit Quarterly Profit

Snap's stock price jumped 6% after a positive note from Citron Research stating Snap should be worth $17 per share and could be an acquisition target. Snap has the lowest market value per user at $77 compared to $387 for Facebook and $171 for Twitter. In 2016, Google considered acquiring Snap for $30 billion or a $135 market value per user. Based on Snap's previous funding round valuation, its fair value is around $20 per share.

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66 views3 pages

Snap Has The Lowest Market Value Per User: Profit Quarterly Profit

Snap's stock price jumped 6% after a positive note from Citron Research stating Snap should be worth $17 per share and could be an acquisition target. Snap has the lowest market value per user at $77 compared to $387 for Facebook and $171 for Twitter. In 2016, Google considered acquiring Snap for $30 billion or a $135 market value per user. Based on Snap's previous funding round valuation, its fair value is around $20 per share.

Uploaded by

Ken_hoang
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Snap (NYSE:SNAP) jumped 6% in a day after Citron Research released a positive note for the

company, stating that Snap should be worth $17 per share and could become an acquisition
target. Snap’s stock price has been fluctuating widely since its IPO in 2017, with the high of
nearly $25.5 and the low of $10.6. At $11.6 per share, it is cheap.

Snap has the lowest market value per user


Most of the social media companies have many years before turning profitable. Facebook
(NYSE:FB) has turned profit for the first time in 2009 while Twitter (NYSE:TWTR) has turned
quarterly profit for the first time after 12 years of operation. Snap, on the other hand, has still
generated losses for the past 7 years. However, the value of social media companies lies in the
value of users. The higher number of sticky users, the higher value the company is.

Let’s look at the value per user of each social media company. To calculate the daily active users
(DAU), I use the ratio of 48% DAU-to-MAU ratio for Twitter as Twitter only disclose MAU
(Monthly Active Users).

Number of
Daily Active Market Market
Users Capitalizatio Value per
  (million) n (million) user ($)
Snap 191 14,630 77
Facebook 1,450 561,500 387
Twitter 161 27,600 171

Looking at this table, we clearly see Snap has the lowest market value per user, only $77 while
Facebook has the highest market value per user, $387, 5 times higher than Snap. Despite
having more users than Twitter, Snap’s market capitalization is only half Twitter’s.

$30 billion valuation for Snap by Google (NASDAQ:GOOG)


In 2016, there was insider news stating that Google is interested to acquire Snap for $30 billion.
Google initial offer was said to be discussed before Snap raised its series F round. In the series F
round, Google capital arm, called CapitalG, has participated in, with Snap’s valuation of $20
billion. Indeed, acquiring Snap could give Google a lot of advantage to get into an established
and growing social network. Snap and Google’s YouTube can cooperate to secure video
content, offer bundle deals to boost ad revenue in both platforms. As series F occurred on May
2016, when Snap had around 148 million daily active users, a $20 billion valuation means a
$135 market value per user. If the similar market value per user applies for Snap today, Snap
should be worth $25.8 billion, or $20.5 per share.

Snap is for new generation


Each app is famous and dominant for each generation. Facebook was a social network of choice
in 2013, Instagram was popular in 2014, 2015. Since 2016, Snapchat of Snap has taken the rein.
Piper Jaffray conducted the survey of 6,000 teenagers to discuss their favorite social platform.
The results? 45% favors Snapchat, 26% favors Instagram, while only 8% and 9% favors Facebook
and Twitter, respectively.

Improving products to deliver more to users and advertisers


Snap has just gone through the redesign to better suits users’ demand. Before the redeisng,
Stories were sorted in a way that users who post most frequently (so called professional
content creators) were at the top of the list. The result is users’ close friends, who often do not
post frequently, were buried below creators. Thus, it makes Snap less personal to users. After
the redesign, Snap separates friends from creators, making users find Stories from close friends.
Users now can search for Stories based on the depth of relationships. In addition, a new place is
built for creators called Discovery section. This section allows Snap to invest in products and
monetization for its creators.

CEO Even Spiegel, Snap’s CEO commented that Snap keeps the leading position in mobile
content and augmented reality. There were 81 million people watched its coverage in Discover
in 9 different languages. In the U.S. alone, there was around 10 million people tuning in daily for
the Games. For augmented reality platform, more than 200 of the lenses created by users were
viewed more than 1 million times in just few months since first launched. Advertisers can
include the button which direct users to a long-form video, or an app store while users are
playing with a Lens in camera. Moreover, Snap focuses on developing tools for advertisers to
grow online sales. It created a self-serve tools, launching Reach and Frequency in its self-service
platform, partnering a multinational conglomerates including Unilever (NYSE:UL), Procter &
Gamble (NYSE:PG), Google, and Microsoft (NASDAQ:MSFT). It also uses Neilsen’s Total Ad
Ratings to measure the effectiveness of Snap reach compared to TV programs. As a result, Snap
said that Snapchat campaigns could deliver 8% incremental reach on top of TV campaigns for
the same brand set, with the spending of only 1/25th of what should have spent on TV
programs.

Key takeaways
Even though it is not yet delivering profit, Snap is cheap at the current price, in terms of market
value per users, users growth, and valuation from the past rounds. Using the metrics of market
value per user and the valuation of the previous funding round, Snap should be worth around
$20 per share.

Snapchat has the lowest market value per user, compared to Facebook and
Twitter.
Google has reportedly interested in acquiring Snap for $30 billion.
Using previous round valuation, Snap should be worth $20 per share.

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