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Welcome to our new subscribers! We’re excited to have you with us as we continue our journey to educate and highlight some of our favorite stock picks. This week we are trying something new out that we think some of our listeners might find interesting, if you are trading for short term and there is a thesis out there that has been circulating through social media. Many investors have been finding ways to leverage trading off of news outside of the stock market that they think could generate revenue. As a young adult who is an avid snapchat user who uses snapchat for everything from pictures for vacations, holidays, funny events with my friends, and other life events, Snapchat has always been a way to hold memories and the feature of seeing back what you did on the same day throughout the years has always been a cool little feature that people love. Below we are breaking down the math behind the projections, the positives, the negatives (yes there are a few) and sharing our personal views.
(This content reflects personal opinions and illustrative scenarios for educational discussion purposes only and is not intended as investment advice.)
Snapchat added a feature to their app that now charges its users for saving data on the app. Now anyone who holds more then 5GB worth of snapchat data on their account will be charged monthly for more storage. The lowest plan starts out at 3$ per month and could go up at as high as 15$ per month for their platinum users.
Recently people have been sending pictures over social media with hundreds of gigabytes of data that they currently have on snapchat, and how they are planning on caving to snapchat and paying for snapchat. I have seen some as high as 150GB of data over snapchat. These people might choose to pay instead of losing the memories they have.
The Math
So let's do a little math for our readers. Taking the conservative approach as we always do to show you the numbers that we are looking at it terms of what this could possibly mean for the company. The company currently does 5.7 billion in revenue a year with a little over a billion users. Taking the conservative estimate of even 3% of these users purchasing this 3$ a month tier, that could add another 90 million dollars per month, or almost 1.1 billion in revenue that could go down as recurring revenue unless somehow people decide that they want to end this cloud. That could add meaningful increase of value to the company that could start as soon as next earnings or two earnings from now. Now imagine this amount was 6%, or even 10% of users. Think about everyone that you know who is between the age of 18-28, and then think about how many of your friends will pay for a service that makes sure that they don’t lose all of these memories. Personally I could see this amount reaching as high as 12% 4x the previous projection that we just did. For reference, the number of snapchat premium users sits at just around 3%. So these amounts would be the total addition, with a total of 15%.
The big issue with all of this the timing. As you can see in the screenshot, snapchat said it will hold memories for up to 12 months before they delete that. Snap has not reported a specific date but online speculation from X says maybe somewhere around September 1st, 2026. Granted that the majority of people are procrastinators, we could see everyone not paying the extra storage amount till right before they lose their data. We think a genius app developer idea would be to create an app you can download snapchat memories for free and then no one would pay for the extra storage. But back to the timing, we have no idea and maybe it will be gradual or a spike in a different quarter or even a decline.
The Positives
The obvious main positive to this new feature is the massive free revenue that will be gained from having people begin to pay for the storage that they have always been using. There may be many users who feel compelled to purchase this service and preserve the thousands of photos and videos they have from everything they have done over the last 10 years. We assume that this revenue will be recurring depending on price dynamics. There are a few cases where we can see this be overridden, but that’s for the negatives. The other positive for this service is that with the continuation of people paying for snapchat may invoke more use of the app. People of the app may feel obligated to use the app and take more pictures and save more on there as opposed to paying for this service and then also paying more for iCloud.
The main negative that we would like to really call out to our users is how bad this company has been in the past with being able to profit off of its users. The company is currently bringing in around 3$ per year per customer. This is horrible, and only 3% of users using platinum means the company has put little to no effort into turning the company profitable, and the stock has shown it. This seems like a last ditch effort by the company to try to generate money. In our opinion the current CEO has constantly been bashed all throughout wall street for not doing what is needed to increase the stock price. The company has also had a massive issue with paying its employees with massive stock based compensation, almost 1 billion dollars per year, which is almost 20% of the revenue the company brings in. A big thing that we will be looking at after this first earnings report for Q4 will be how much stock based compensation the company plans on awarding its workers. If this seems to directly go into the pockets of the board we may not be holding the stock for long and will certainly not be adding to our position.
Our Thesis
We are encouraging everyone to do all of their own research and come up with their own risk tolerance and opinion, and we will share our perspective and how we are thinking about the situation. The first thing we are doing is letting the noise die down. Immediately after this announcement the stock jumped 10% on the news, and then continued its steady decline over the last couple of years. We would never tell our readers that we believe in the company, because we don’t, but we are evaluating a potential position ahead of earnings in the next couple of quarters as part of our research process. The fact of the matter is that we don’t think this company could keep declining. It has too many users and there is such a draw to the app that someone is eventually going to profit off of this “addiction” that young people have for the app. Whether this changes the course of the company for good, we have no idea, but we are looking into the upcoming earnings in the chance that the company can show somewhat of an adoption of its data storage subscription. But as we previously said since their is 12 months before anyone would NEED to pay, people may buy this right before or gradually or even not at all. We will be reading through the earnings to see how consumers are reacting to this new feature and will keep an eye open.
This newsletter is for informational and educational purposes only and reflects the personal opinions of the authors. It does not constitute financial, investment, legal, or tax advice, nor is it a recommendation or solicitation to buy, sell, or hold any securities. All views expressed are subject to change without notice. Any projections, estimates, or forward-looking statements are hypothetical in nature, based on assumptions that may not materialize, and are provided for illustrative purposes only. Actual results may differ materially. The authors may hold positions in the securities discussed and may change such positions at any time without notice. Readers should conduct their own independent research and consult with a licensed financial professional before making any investment decisions. We make no representations or warranties regarding the accuracy or completeness of the information presented and accept no liability for any losses arising from reliance on this content.
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