Why is Snapchat so Cheap?

Slowing growth but still big.

Andrew Willis 3 June, 2022 | 8:12AM
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Andrew Willis: Last Monday,  Snap (SNAP) took an epic tumble, losing nearly half of its value in a single day on slowing growth prospects in the face of macroeconomic headwinds.

As senior equity analyst Ali Mogharabi explains, the fear is that during economic downturns, advertisers prioritize purchasing inventory from larger platforms like Facebook, Instagram, TikTok and Youtube over the likes of Snapchat and Pinterest.

Snap recognized this as well, cutting its guidance on user growth and earnings for the 2nd quarter. However, the market reaction may have discounted the fact that there remain 319 million users, the network effect continues to bring in new users, and new innovative features mean new avenues for monetization with existing users.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Snap Inc Class A13.17 USD0.30Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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