Snap Inc (NYSE: SNAP)

Sector: Communication Services Industry: Internet Content & Information CIK: 0001564408
Market Cap 12.62 Bn
P/B 5.67
P/E -25.41
P/S 2.19
ROIC (Qtr) -9.68
Div Yield % 0.00
Rev 1y % (Qtr) 9.78
Total Debt (Qtr) 4.15 Bn
Debt/Equity (Qtr) 1.86

About

Snap Inc., popularly known as Snap, operates in the technology industry with the ticker symbol SNAP. The company is renowned for its social media platform, Snapchat, which allows users to exchange photos and videos. This essay will provide an overview of Snap's primary business activities, revenue generation, and competitive position in the industry. Snap's main business activities focus on its flagship product, Snapchat, which is a visual messaging application offering augmented reality (AR) lenses, filters, Bitmoji, Snap Map, and Spotlight. Snap...

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Price action

Investment thesis

Bull case

  • Healthy cash reserves of 953.32M provide 10.54x coverage of short-term debt 90.42M, demonstrating strong liquidity position and minimal refinancing risk.
  • Robust free cash flow of 413.99M exceeds capital expenditure of 203.23M by 2.04x, indicating strong organic growth funding capability.
  • Short-term investments of 2.04B provide solid 2.09x coverage of other current liabilities 976.55M, indicating strong liquidity.
  • Operating cash flow of 617.23M fully covers other non-current liabilities 66.77M by 9.24x, showing strong long-term stability.
  • Tangible assets of 5.78B provide robust 5.92x coverage of other current liabilities 976.55M, indicating strong asset backing.

Bear case

  • Operating cash flow of 617.23M barely covers its investment activities of (38.51M), with a coverage ratio of -16.03, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (38.51M) provide weak support for R&D spending of 1.74B, which is -0.02x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Cash reserves of 953.32M provide limited coverage of acquisition spending of (35.50M), which is -26.85x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • The company's operating cash flow of 617.23M shows concerning coverage of stock compensation expenses of 1.02B, with a 0.61 ratio indicating potential earnings quality issues.
  • Operating earnings of (383.52M) show weak coverage of depreciation charges of 159.83M, with a -2.40 ratio indicating high capital intensity and potential reinvestment needs.

Peer comparison

Companies in the Internet Content & Information
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 GOOGL Alphabet Inc. 4,538.16 Bn 131.46 27.23 33.71 Bn
2 META Meta Platforms, Inc. 1,747.49 Bn 74.30 23.25 51.06 Bn
3 SPOT Spotify Technology S.A. 103.00 Bn 62.32 5.18 2.57 Bn
4 BIDU Baidu, Inc. 62.73 Bn 49.63 3.42 13.66 Bn
5 RDDT Reddit, Inc. 32.18 Bn 92.16 16.90 0.03 Bn
6 NBIS Nebius Group N.V. 27.81 Bn 127.53 81.80 4.51 Bn
7 TME Tencent Music Entertainment Group 24.66 Bn 15.77 5.54 0.54 Bn
8 PINS Pinterest, Inc. 16.95 Bn 8.53 4.18 0.21 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 2.10 1.10
EV to Cash from Ops. EV/CFO 25.74 -3.08
EV to Debt EV to Debt 3.82 28.98
EV to EBIT EV/EBIT -41.42 -26.54
EV to EBITDA EV/EBITDA -35.39 9.30
EV to Free Cash Flow [EV/FCF] EV/FCF 38.37 -67.01
EV to Market Cap EV to Market Cap 1.26 0.90
EV to Revenue EV/Rev 2.75 61.25
Price to Book Value [P/B] P/B 5.67 1.56
Price to Earnings [P/E] P/E -25.41 2.92
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 0.33
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 -8.92
Dividend per Basic Share Div per Share (Qtr) 0.00 0.31
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 2.58
Interest Coverage Int. cover (Qtr) -4.20 -202.56
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -1.48 -24.06
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -1.21 175.36
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 0.94
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 57.04 31.53
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 46.45 -472.14
EBIT Growth (1y) % EBIT 1y % (Qtr) 57.88 32.66
EBT Growth (1y) % EBT 1y % (Qtr) 49.02 -25.80
EPS Growth (1y) % EPS 1y % (Qtr) 50.00 -18.36
FCF Growth (1y) % FCF 1y % (Qtr) 181.34 20.83
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 14.31 19.58
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.76 0.74
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.02
Cash Ratio Cash Ratio (Qtr) 0.78 1.54
Current Ratio Curr Ratio (Qtr) 3.67 3.38
Debt to Equity Ratio Debt/Equity (Qtr) 1.86 -0.39
Interest Cover Ratio Int Coverage (Qtr) -4.20 -202.56
Times Interest Earned Times Interest Earned (Qtr) -4.20 -202.56
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) -3.90 -4,283.87
EBIT Margin % EBIT Margin % (Qtr) -6.64 -4,786.62
EBT Margin % EBT Margin % (Qtr) -8.23 -5,002.12
Gross Margin % Gross Margin % (Qtr) 54.30 58.65
Net Profit Margin % Net Margin % (Qtr) -8.60 -5,003.08