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Issue // February 28, 2023
UPDATE
February is Out
By The MARK IT. Team
🌤️ Good morning, and happy Tuesday. It’s hard to believe that this is the last day of February for 2023, time flies quickly in the beginning few months of the year. Two months into the spring semester also means that many students will see midterms starting up; some already have had a few. If you have midterms, or any big essays, in the next couple of weeks, we wish you the best of luck. You got this!
We also wanted to say how much we appreciate the positive feedback on our MARK IT. Explained section that we added a few weeks ago. Our goal here has always been to educate, and seeing such great reception to our more focused articles is something that keeps us going.
WEEK IN REVIEW
How Low Can You Go?
By Abbas Akhtar
Last week was a rough one for the S&P. Since late January, the index was valued above 4000 points, but a downward trend on Tuesday morning sent the market below that line. It wasn’t a hyper-volatile day like most Mondays (or first weekdays) can be, but there wasn’t any sign that an upward tick would happen either. From Tuesday's opening to Tuesday's close, the S&P dropped 1.35% in a steady downward fashion.
Wednesday and Thursday, however, were more volatile. Wednesday morning saw a slight recovery just above the 4000-point mark before the index once again shot down below. Thursday had a similar story: a small uptick before a whopping 1.80% decrease late Thursday and early Friday. The week as a whole saw an approximate 1.50% decrease—a disappointing performance after an early 2023 rally.
Yesterday, however, did show signs of at least some rebalancing (if not a recovery). Monday at 10:30 am CT saw the index peak once again above 4000 points. While the small uptick didn’t hold, the decrease was nowhere near as drastic as Wednesday and Thursday. All in all, the market yesterday seemed to break even by closing time. CNBC noted the higher close after the “worst week of 2023.”
WEEKLY WATCHLIST
One and Done
For this week, we’re bringing just one company to your attention because we see some shorter-term potential for the company after some news. We also think this company has the potential to be around for a while, seeing as it’s a social media used every day, especially by teens and young adults.
STOCK #1
Snapchat (SNAP)
Founded in 2011 by Evan Spiegel and Bobby Murphy, Snapchat has remained largely relevant in the social networking world and is still an essential app for daily use. According to Social Shepard, Snapchat has 363 million daily active users as of Q1 2022.
What’s more, Snapchat is still managed by the founders. Co-founder Evan Spiegel has been the CEO since its founding, and according to CNN, he refused acquisition offers from Facebook’s Mark Zuckerberg back in 2013.
We’re bringing Snapchat to your attention this week because Reuters reported that the company recently announced that it would be rolling out an AI for its premium users. With the explosive rise in chatbots and AI technology, we see this as a potential growth factor for Snapchat.
SNAP Stock (6-month), via Google Finance
⚠️ Evolving cash flows: Until 2021, Snapchat hadn’t had positive cash flows. Once the Snapchat+ premium plan was launched, Snapchat began to have positive cash flows which are likely to grow so long as the company can attract more subscribers.
🛑 No dividend: Snapchat does not currently pay a dividend.
✅ Undervalued according to DCF: Based on our discounted cash flow model, a single SNAP stock at Monday’s market close price of $9.88 is 10-12% undervalued.
âś… Low debt: Of the total Enterprise Value (EV) of Snapchat, debt is approximately 21% (4.17B) compared to a market cap of 79% (15.62B).
MARK IT. EXPLAINED
IPO: How a Company Figures Out Their Initial Value When They Go Public
By Rahul Kannam
IPO. Initial Public Offering. Those words usually accompany a celebration at the New York Stock Exchange when a company goes public with many watching. Yet, the process for an IPO is a complicated one, and it’s important because valuation comes from this.
First, there is an investment bank hired that is brought in to value the company. To determine a valuation for the IPO, various factors need to be considered such as projected demand for the said company’s shares, growth potential, industry, and its financial statements. It’s essential to critically think and analyze the financial statements because that is the root of the IPO. However, it must be said that some companies haven’t had a long history of disclosing their financial statements or they haven’t established any trading history, so methods as conventional as these aren’t available when trying to understand an IPO.
Moreover, the process for the IPO requires the company involved to make or release the three main financial reports: balance sheets, cash flow statements, and income statements for the public. There’s a lot to consider, but an IPO involves a deeper look at a company’s existing financials along with external analysis to build an initial value, backed up by proper disclosures, for when the company goes public. Source: Investopedia
ONE MORE THING
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