Snap Inc.

SNAP Details

Revenue Jumped 52.1% Y-o-Y Aided by Growth in Daily Active Users: Snap Inc. (NYSE: SNAP) is a camera-based application company that facilitates to communicate via short videos and images called “Snaps.”

Q3FY20 Financial Highlights for the Period ended 30 September 2020: SNAP announced its quarterly results, wherein the business reported revenue of $678.7 million, up by a whopping 52.1% year over year, aided by growth in daily active users (DAUs) across North America, Europe, and Rest of World. The company reported DAUs at 249 million in Q3FY20 as compared to 210 million in Q3FY19. The company added 39 million DAU on a year-over-year basis, owing to growth in both iOS and Android platforms. Average revenue per user (ARPU) during the quarter soared 28% on pcp and came in at $2.73. North America and Europe ARPUs went up by 46% and 36% on pcp, respectively. The business witnessed more than 50% y-o-y increase in total daily time spent by Snapchatters watching Discover. Non-GAAP gross margin expanded from 51% to 58% in 3QFY20. Operating expenses increased 24.4% year over year and came in at $338 million. Adjusted EBITDA was $56 million as compared to a loss of $42 million in the year-ago quarter. The company exited the quarter with a cash balance of $2.7 billion. Net cash used in operating activities stood at $54.8 million, with free cash outflow amounting to $69.5 million.

2QFY20 Key Financial Highlights (Source: Company Reports)

Key Developments: Recently, the company unveiled Snap Select gaming bundle, which is the first commercial bundle customized to a particular category and has led to impactful partnerships with advertisers. The company also unveiled its first Local Lens experience called City Painter, letting Snapchatters to virtually paint the shared digital space on Carnaby Street in London. During the quarter, SNAP joined the alliance with Champs Sports, Clearly, Essie, Hoka One One, Kohl’s, Levi’s, Jordan Brand, and Sally Hansen.

Stock Recommendation: The stock of SNAP closed at $41.27 with a market capitalization of ~$61.49 billion as on 26 October 2020. The stock is trading close to it 52-week high of $43.19. Notably, in the last one month, the stock of the company went up by 67.15%. The company delivered strong results in Q3FY20. Investments made by the company are continuously driving the growth of the community and the business. Higher ARPU and user base growth were key positives during the quarter. On the technical analysis front, the stock has an immediate support level of ~$34.64 and a resistance level of ~$44.09. Considering the aforesaid facts, current trading levels, increase in ARPU, higher user base growth, and strong liquidity position, we give a “Hold” recommendation on the stock at the closing price of $41.27, down by 4.4% as on 26 October 2020.

SNAP Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Pinterest, Inc.

 PINS Details

Higher Investments Remain a key Catalyst: Pinterest, Inc. (NYSE: PINS) is a technology-based company that operates in a visual discovery engine which is used by end-users for the discovery of information. On October 20, 2020, the company appointed Salaam Coleman Smith to its Board of Directors, effective from October 31, 2020. Mr. Smith was the former Executive Vice President at Disney’s ABC Family and Freeform and former President of Comcast NBCUniversal’s Style Media.

Termination of Contract:  In a recent update, the company stated that it has terminated its lease for ~490,000 square feet of office space to be built near its existing headquarters campus in San Francisco, California. The company intends to continue to lease its current constructions in downtown San Francisco and continues to be a member of the local community.

June 2020 Quarter Highlights: For the June 2020 quarter, the company reported total revenue of ~$272 million, up 4% on pcp. From the US, the company reported revenue of $232 million, down by 2% on pcp. From International business, the company reported revenue of $41 million, up 72% on pcp. The Global Monthly Active Users (MAUs) grew 39% year over year to 416 million in June quarter. During the quarter, the company incurred a GAAP net loss of ~$101 million.

June Quarter Results Highlights (Source: Company Reports)

Outlook: Due to the uncertainties related to the ongoing COVID-19 pandemic and the rapidly shifting macroeconomic conditions, the company has not provided FY20 revenue or adjusted EBITDA guidance. The company expects that its revenue in the September 2020 quarter will grow in the mid-30% range year over year. Looking forward, the company intends to remain prudent in the near-term while ensuring it invest in and prioritize the long-term growth of the company. The company intends to release its Q3 FY20 results on 28 October 2020.

Valuation Methodology: P/BV Multiple Based Relative Valuation (Illustrative)

Price to Book Value Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last three months, the stock of the company has provided a return of 107.91%. In the last six months, the stock increased by 142.82%, due to which the stock is currently inclined towards its 52-week high of $53.23. On the technical analysis front, the stock has an immediate support level of ~$48.43 and a resistance level of ~$53.85. We have valued the stock using the P/BV multiple based illustrative relative valuation method and arrived at a target price with a correction of low-single digit (in % terms). For the said purposes, we have considered Snap Inc (NYSE: SNAP), Alphabet Inc (NASDAQ: GOOGL), Facebook Inc (NASDAQ: FB) to name a few. Considering the aforesaid facts, loss in June 2020 quarter, stock performance in the past, current trading levels, we are of the view that most of the positives are factored in at the current juncture. Hence, we give an “Expensive” rating on the stock at the closing price of $50.46, down by 4.79% on 26 October 2020.

PINS Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer  

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.