I’m a firm believer in giving credit where credit is due, and acting on opportunities when they present themselves. To that end, Snap (NYSE:SNAP) CEO Evan Spiegel has become a savvy CEO rather quickly, making SNAP stock the compelling prospect it was supposed to be two years ago (but wasn’t).
The young social media platform operator still has its challenges ahead of it, to be sure. Chiefly, rivals Twitter (NYSE:TWTR) and Facebook (NASDAQ:FB) — and Facebook’s Instagram — serve a crowd Snap would love to win over.
Snapchat’s Spiegel appears to have made his way through the learning curve much faster than Jack Dorsey or Mark Zuckerberg did, however.
The latest savvy move? Borrowing money, not necessarily because the company needs it right now, but because that capital can be secured so cheaply at this time when the market sees Snapchat stock in a favorable light.
Rough Start for Snapchat Stock
If this seems odd coming from me, there’s a reason. I’m the same guy who panned Spiegel a couple years back for green-lighting Snapchat’s Spectacles, or glasses with built-in cameras that allow users to do some hands-free filming and photo-taking.
A few people liked them, but most people just didn’t care … something that would have been clear had the company bothered to do some testing and marketing research.
The end result was a $40 million writedown.
I chalked it up to Spiegel’s youth, suggesting concern about other business-management matters that can only be taught with time and experience.
A mostly-mishandled overhaul of the Snapchat app in early 2018 was another hint that the then-27-year-old Spiegel had much to learn. A more monetizable app makes sense, but a company should make a point of hand-holding and easing customers through a significant transition. Snap didn’t.
Snap Stock: Seen it Before
It’s not the first time a young CEO of a young internet platform lost sight of the balance between users, investors, and reality. Twitter went through it, too.
At its inception in 2006, microblogging platform Twitter was meant only to be an easy means of sending SMS text messages to mobile phones (at a time when smartphones weren’t yet the norm, and texting was still an incredible evolution). As technology — and the use of it — evolved, consumers were increasingly, proverbially asking “what am I supposed to do with it?”
For a long while Dorsey, and before him Dick Costolo, didn’t have a clear answer, leaving Twitter users to figure out how to utilize the platform. It wasn’t until the past three years Twitter began providing delineated topics to talk (ok, argue) about. For example, Twitter now has relationships with major sports leagues, pairing video broadcasts with the Twitter feeds of members watching, and tweeting about, that event.
Facebook’s Mark Zuckerberg, meanwhile, still hasn’t seemed to figure out that merely appearing in front of a Senate committee, or a European regulatory hearing, is bad for business because it looks bad. Rather than staying off the regulatory radar, Zuckerberg appears to be making a deliberate effort to stay in it.
Well Played Evan Spiegel
Incredibly, Snapchat has been able to sidestep a series of gaffes that have invited scrutiny from the Department of Justice. It may just be the nature of the platform, or it may be because Spiegel recognizes the downside of pushing privacy boundaries too far.
Regardless, user growth that had stagnated for Snapchat has been rekindled. During the first quarter of this year, the company reported 190 million daily users, up sequentially from 186 million.
They’re being monetized better too, with revenue up 39% year-over-year.
He may be siphoning off some Facebook users that have finally grown weary of an enormous social networking platform that has turned into little more than a political battleground laden with a few too many ads … a balance that has not been found in some time.
The addition of games to the Snapchat platform injected some savvy stickiness into the mix as well.
The latest stroke of brilliance is Snap’s fund-raising. It’s issuing $1.1 billion worth of convertible notes.
Snap doesn’t necessarily need the money. It has only said it may use the money for investments in tech, possibly including acquisitions. There’s no specific earmark though, and no particular timeframe for its use.
It’s brilliant all the same though. Not only is Spiegel refilling the coffers at a time when interest rates are at multi-year lows, he’s using Snap stock as the basis for the loans at a time when shares are valuable currency. The SNAP stock price has more than tripled in value since late December, and there’s no reason to think it can’t continue logging gains.
Bottom Line for SNAP Stock
One smart decision doesn’t inherently make Snap stock a bulletproof player. There are still several things that could go wrong for the relatively young social media name.
If Evan Spiegel’s newfound feel for the role of CEO is any indication, however, at the very least Snapchat stock is in good hands. He seems to have mastered the balance of keeping advertisers, investors, and users happy, while simultaneously growing the size of the user base.
That’s something this reporter didn’t think would happen until much, much later when someone else was at the helm.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.
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