About Snapchat

Snapchat, officially known as Snap Inc., is a multimedia messaging app created by Evan Spiegel, Bobby Murphy, and Reggie Brown, and it was released in 2011. The app allows users to send photos and videos that disappear after being viewed, creating a sense of ephemeral communication. Over time, Snapchat has evolved beyond its initial concept and introduced various features, including Stories, Discover, and augmented reality (AR) filters.

Snapchat has gained popularity, particularly among younger demographics, due to its unique approach to messaging and the constant introduction of new features. The company went public in 2017 with its initial public offering (IPO). While it faces competition from other social media platforms, Snapchat continues to be a relevant player in the social media landscape, despite their stocks not being on the brightest level.

Partnership with Amazon

Snap Inc. experienced a 3.5% surge * in its shares during early Tuesday trading following reports from The Information indicating a collaboration between the social media company and Amazon. The partnership is poised to allow Snapchat users in the U.S. to directly shop for products through ads within the Snapchat app. This move echoes a similar initiative between Amazon and Meta to facilitate shopping on Facebook and Instagram. By integrating its shopping features into prominent social media platforms, Amazon aims to bolster its e-commerce footprint and access a broader user demographic.

As mentioned, Snap is not the first company to think of it, as Meta, TikTok and even X (formerly Twitter) are exploring or already added this feature to their application. [1]

Financial reports outperformed

Snap Inc. disclosed a 5% increase in its third-quarter 2023 revenue, reaching 1.4 billion USD. Despite this growth, the company faced a 6% decline in Average Revenue Per User (ARPU), dropping to 2.93 from 3.47 USD a year earlier. The net loss for the quarter amounted to 368.3 million USD. The key driver for revenue growth was a 12% YoY increase in daily active users (DAUs) to 406 million. However, Snap Inc.'s struggle to maintain positive free cash flow and high operating expenses, comprising approximately 132% of its revenue, pose challenges to the company's financial performance. Despite these hurdles, Snap Inc.'s shares have risen by 10% year-to-date, though it lags behind the broader tech sector's performance. * The introduction of the company's chatbot, My AI, has not significantly impacted its financial trajectory.[2]

UK warned Snap about their AI Chatbot

The Information Commissioner's Office (ICO) in the United Kingdom has issued a preliminary notice to Snap Inc. and Snap Group, the parent companies of Snapchat, warning about potential privacy risks associated with the platform's new AI chatbot, "My AI." The ICO's notice suggests that Snap Inc. failed to properly assess the privacy risks before launching the chatbot. The regulator's preliminary investigation indicated that the risks to several million My AI users, including children aged 13–17, were not adequately identified. Snap Inc. has been given an opportunity to respond before any formal regulatory action is taken.[3]

Stock development

Snapchat’s stocks have had a rollercoaster ride in the past five years. From 6,49 USD in 2018, they have managed to climb to an all-time high at 83,11 USD in September 2021. It marked a growth of 1180%, which was then surprisingly followed by 86,40% downfall, which caused the price to settle at current one, 11,30 USD per stock.

Movement of Snap stocks in the last five years. (Source: Google Finance) *

Conclusion

Despite stocks not performing well, we still think that Snapchat would be a worthy stock to look at and follow its movement. Just to keep in mind that if it ever returns to its all-time high, it could present nice opportunity for traders. Their plans and partnerships also show that they are willing to improve and fix their possible past mistakes.

Adam Austera, chief analyst at Ozios

* Past performance is no guarantee of future results.

[1] https://www.investing.com/news/stock-market-news/snap-gains-on-report-it-agreed-a-deal-with-amazon-on-shopping-ads-432SI-3233454

[2] https://www.investing.com/news/stock-market-news/snaps-q3-results-outperform-but-high-operating-costs-and-competition-pose-challenges-93CH-3219727

[3] https://cointelegraph.com/news/snapchat-warning-ai-chatbot-risks-uk-watchdog