Snap Inc. (NYSE: $SNAP) is a communication services company behind the Snapchat mobile app. It also develops, manufactures, and sells wearable cameras called Spectacles, which connect users to their Snapchat accounts to record video.
Most of the company’s revenue comes from its Snapchat mobile application ads. Additionally, it makes some money from subscriptions and the sale of wearable technology.
The company’s stock has recently been trending upward after details regarding its deal with Amazon emerged.
The Amazon Deal
The deal between Amazon (AMZN) and Snapchat (SNAP) will see US users buy products directly from their Snapchat app. Amazon hopes to capitalize on the growing use of social media for shopping. Various platforms, like TikTok, are already capitalizing on social media’s ability to influence shopping trends with the launch of a shopping service.
Amazon has signed similar deals with Facebook’s Meta Platforms (META) and Pinterest (PINS). The partnership could help boost Snap’s ad business, which posted better-than-expected earnings in October 2023.
Some analysts view this as a battle with TikTok, increasingly taking up a huge chunk of the impulse-driven shopping phenomenon on social media.
The new deal between Snap and Amazon will allow shoppers to check out directly on Snapchat using Amazon ads on the platform. Buyers will see real-time prices, delivery estimates, and product details within the ads on Snapchat.
Snap Inc. Earnings Report
Snap Inc. released its Q3 earnings report on October 24, 2023. The company revealed that revenue was growing, having increased 5% year-over-year.
Revenue was $1.189 billion for Q3 2023, compared to $1.128 billion reported in Q3 2022. It reported earnings per share of $0.02, against an expected -$0.05, a surprise of 136.40%. Snap Inc. has consistently beaten analysts’ EPS estimates in the last four quarters.
The company also revealed that the board had authorized a stock buyback plan of up to $500 million of Class A common stock. In other positive news, Snap Inc. disclosed that its daily active users had grown to 406 million in Q3, a 43 million rise, representing a year-over-year increase of 12%.
Additionally, total time spent on Snapchat’s Spotlight had grown over 200% year-over-year. The company also revealed that since they launched their AI-powered My AI chatbot, over 200 million people have used it to send over 20 billion messages.
Snap Inc. Outlook
In the outlook section, Snap expects its daily active users to grow to 410-412 million. The company, however, pointed out that it had seen a pause or reduction in ad spending since the Middle East conflict began.
Consequently, it projects revenue in Q4 at around $1.320 billion to $1.375 billion. Nevertheless, it would still represent a year-over-year growth in revenue of 2%-6%.
Snap Inc. Stock Performance
At the close of trading on November 14, 2023, Snap Inc. (SNAP) stock was trading at $12.15 per share, having risen by 7.52% during the trading session.
At one point, it was up nearly 9% from the previous closing price. The Amazon deal was the main driver of the rise. However, SNAP stock has performed quite well in 2023, up 37.29% year-to-date.
SNAP Stock Forecast
Stock analysts give SNAP stock a solid hold rating. That means they expect the stock to perform the same as the rest of the market in the next 12 months.
The analysts predict a high price of $14 and a low of $7 for the stock. Consequently, the average price target is $10.03, representing a price change of -17.45% from the current price of $12.15.
Should You Buy SNAP Stock Right Now?
In its most recent earnings report, Snap Inc. warned of potential headwinds in Q4. However, the company also revealed a solid plan to grow its user base. It has recently signed a lucrative deal with Amazon that could help boost its revenue.
It is worth noting that Snapchat has a lot of room to monetize its user base. As such, there is still significant potential for the stock. Nevertheless, the analysts’ current hold rating is an accurate representation of the stock right now.
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