Top Tech Stocks: Growth in Snap, Inc.; Revisited 02.08.21

Good Monday everyone and welcome to the BCB Cyber Series that takes on the Tech stocks that can provide the cyber-fuel we need to pursue our digital wealth passions. This week we are in re-hash mode as we revisit our original investigation on SNAP as it continues to soar higher and go for the update and extended analysis. Much of what follows is a reprint however many new additions are in red to explode our analysis!

Today we are back on track in the new month with Tech-Growth Companies. As always, we are digging for the cyber fuel we need. For all these growth stocks we are looking for top-line revenue growth of 20% or more!

Growth of Snap Inc. (REV Revisited)

Before we dive too deep though, as always BCB Cyber loves the deep dive, we strongly advocate that you don’t act solely on anyone’s opinion, even ours! Make sure we are all thinking for ourselves as self-definers and making our own decisions. In the end, the responsibility is on each one of us as individuals. So decide wisely!

Jumping right in, we do these quick deep dives so we can all get the info we need, but also do so in a way that keeps us going in our day. To do this the BCB Cyber way we cover 3 quick pieces of important information. First, we tackle the story to find out who and what the company is, second, we look at the numbers both positive and negative, and finally we discuss our own BCB Cyber position.

This is TS2B, Tech Stock to Buy, hi-tech growth edition, and this week we are going RE-ANALYZING Snap Inc., the Santa Monica, California Camera Company blowing away the social media world with its primary platform Snapchat and its tech that allows for the “fastest way to share a moment.” High growth for BCB Cyber again takes on that 20% growth in the past and future and that’s exactly what we see as the annualized average for the past three years has been approximately 45%, the current year (2021) expecting 41.40% and for next year (2022) expecting 37.30% (UPDATED STATS 2.8.21).

Snap is one of the fastest-growing companies out there in an incredible growth sector. Just in content discovery, Snapchat is the place to be. For all those Snapchatters over the age of 35, the total time spent daily by those over 35 utilizing Discover content increased by 40 in the 2nd quarter, year over year, 2020. As for the Gen Z reach, it is incredible… Snap Originals reach “85% of US Gen Z audience in last half of 2020.” Just check out that source link with the image below. That’s impact!

Competing with names like Facebook, Instagram, Pinterest, Tumblr, and Twitter, we all know the industry and how big it is. Snap, Inc. is the internet content and communications company we need to consider for the cyber-fuel that can power our wealth creation.

1 – STORY

Snap is an incredible company with a fantastic growth story. This has become more the case than ever as the Pandemic has driven on! Snap just keeps grabbing audiences.

It hits all the story-lines we’d love to see in a disruptive tech company. For those who don’t see the disruptive tech just check out the last few years of product development surging with new additions in the machine learning and augmented reality space.

One of the most unique aspects of the technological integration regarding disruptive innovation found with Snap Inc. is that it is not just a gimmick for the company. Snap Inc. is progressively seeking the integration of these features into specialized communities.

As we said, Snap, Inc. is ALWAYS innovating… In the latest investor presentation, they were again demonstrating this. Putting simplistic, easy to use navigation at the heart of the experience, Snap recently unveiled its new action bar. Making preferred content easier to attain without seeming creep, that’s a winner.

Leadership has seen a few trying times in recent years but looks to have turned the corner. Glassdoor now states that Snap Inc. has an employee rating of 77% approval for the CEO, a 4.0 overall rating, and 76% would recommend the company to their friends. Updates for February have started to move these needles. Employee approval of CEO has moved to 81%, recs to friends is down to 74%, but the overall rating is still at a 4.0. (Numbers Update 2.8.21)

Furthermore, this leadership team has developed a strong, diverse, and market-focused product suite that sees incredible adoption. This team is primed for next-gen growth.

Finally, a nuanced and well-developed ad strategy helps to lead the company forward in revenue generation.

For BCB Cyber, the story update is still waxing INCREDIBLE. Snap Inc. tells a phenomenal story, making the most of next-gen tech with a focus on next-level growth markets. Now, let’s turn to the numbers.

2 – BY THE NUMBERS (CHART REVISITATION 2.8.21)

BCB Cyber loves to follow five specific metrics: Sales/Revenue Growth (noted above), Forward Price to Earnings Ratio, Return on Assets, Operating Margin, and Debt Considerations.

While Snap Inc. does have a few risk factors, not limited to a high Forward P/E (common to its peer companies in their industry), and a big-time increase in book value multiple, we always expect to pay up for incredible growth opportunities. This story continues to be at the core as forward P/E is still hovering around 300, yet this is down from the end of the calendar year 2020. However, we still must be careful as to the price we pay. This shows others are still ramped up on this stock and trying to get ahead of the growth curve in recognizing the value in the stock for Snap Inc.

Recent trends certainly indicate that the market awareness of the is opportunity is currently over-exposed. Snap Inc. represents other risk factors as well with a negative Return on Assets and a negative Operating Margin. Wow, these are still super negative but they are improving!

With risk factors, we must always be examining the opportunity for the business to keep pushing forward and maintaining the financial flexibility to keep innovating. That’s where debt comes in. As for Snap Inc., debt does seem well covered by its cash assets and does appear manageable. This is the core situation to continue watching, sustainability comes from a combo of factors. Yes increasing the user base and time on the platform and reach are all incredible but you still need cash to make the machine run. It goes without saying, we still need to keep a critical eye on this aspect!

With all the risk factors presented here, it is also worthy to note that taking into account the revenue growth seen at the outset of our analysis, the chart we presented also demonstrates that the loss (in earnings) has been reducing in the overall amount quite considerably. This does indicate a more positive outlook for the future of Snap Inc. as it works towards profitability. This trend has continued too, albeit with a diminishing rate. With all this in mind, we turn to our Cyberized take on the matter.

3 – THE BCB CYBER TAKE

The chart that was in November 2020 for Simply Wall Street…

Is still much the same as the chart that is, today (2.8.21), for these particular analysts, however, to “encourage” their position they have upgraded the balance sheet to an “adequate” from “mediocre balance sheet.” See for yourself.

However, BCB Cyber does urge a word of warning to that proposed better positioning on the balance sheet as the cash position does seem to be becoming a bit more tenuous. Although, we do see the capital markets continuing to supply a steady stream. Nonetheless, still something to watch.

As of this morning, on 2.8.21, our stake in Snap still sits at one speculative share with a cost basis of $23.50. As the price simply skyrocketed from $43.96 (11.9.20) to $63.86 (this morning 2/8/21 in premarket conditions), the unrealized gain has gone from 87.06% to a whopping 170.13%. Not a bad return indeed! It has doubled over again from our initial purchase.

Perhaps, you’ll say we should’ve jumped in with both feet. Perhaps indeed. However, remember, we are just like the masses, struggling to make ends meet and build our future. So, sometimes, a single share is just what we need to start us on our journey toward cyberizing our lives.

As we’ve near tripled our position sizing we’d like to offer a little perspective. As we recognize that this stock could be very risky, remember the financial numbers do show reason to be concerned. However, with our single share, we have still made a great stride. You’ll say it’s only a $40 win. But, that is over 5.5times the hourly minimum wage in the US of $7.25/hour. So the American worker putting in over a half a day’s labor would barely make this gain and all we did was make a purchase and let it sit. My guess is that minimum wage workers would be relieved not to have to work that extra half-day for that kinda return.

This is the power of the markets. But we do need to weigh the risks and balance our portfolios to the levels we are comfortable with. Despite what many say though, we can do this for ourselves.

BCB Cyber STILL believes in the potential for this risky, tech innovator and loves the story. However, this is definitely a stock worth buying at the right price and one that BCB Cyber believes to be the right fuel for the fire! Remember we balance our perspective and cyberize our wealth over a longer term of 5 years or more. We will definitely be looking to add to our position, with the right portfolio proportions of between 1 and 2 percent and at the right price. We will still be buying if it corrects into the mid-, to low-forties. Although we don’t lie, we’ll be tempted in the $50s.

Remember, as always, think for yourself, do your own homework, and cyberize your life with the best in disruptive tech. Learn more in our Wealth Section and dive deeper into Establishing the Baseline. See you next time on BCB Cyber.com!