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Snap Inc Class A SNAP

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Morningstar’s Analysis

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Strong Ad Demand Drove Snap’s Solid Q2 Results; Raising FVE to $21; Shares Overvalued

Ali Mogharabi Senior Equity Analyst

Analyst Note

| Ali Mogharabi |

Snap grew user monetization much faster than we expected during the third quarter, which resulted in the top and bottom lines coming in better than our projections. We are raising our fair value estimate to $21 from $18 given the third-quarter performance and our overall assumption of continuing growth in digital ad spending as the economy recovers and advertisers allocate more to online platforms. But the stock remains overvalued in our view (up 23% after-hours), trading 60% above our revised fair value estimate and at 14 times 2021 revenue.

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Company Profile

Business Description

Snap, which refers to itself as a camera company, has one of the most popular social networking apps, Snapchat, in developed regions such as North America and Europe. The firm has approximately 158 million daily active users. Snap generates nearly all of its revenue from advertising with 88% coming from the U.S. The firm is headquartered in Venice, California.

2772 Donald Douglas Loop North
Santa Monica, CA, 90405
T +1 310 399-3339
Sector Communication Services
Industry Internet Content & Information
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type Speculative Growth
Employees 3,195