Which internet and social media company will dominate the market next? Is it either Snap (SNAP) or Sogou (SOGO), and whether either of them a safe buy as a long term investment?
This is Sailesh Tirupasur. I'm a part of Stock Card's summer internship program in 2020, and this post is a part of my Stock Battle series. I don't own these two stocks, and my goal here is to study them to decide whether to invest or not.
These stocks are apart of our Companies Shaping the Future stock list. If you want to see other stocks in this category, click here.
Sogou (SOGO) is a Chinese search engine with a language input technology that captures Chinese expressions and phrases on the internet. Recently, the company's shares were moving up, which has speculative investors interested in the stock. Its recent earnings report shows that the company's search business is outperforming the market despite the pandemic. Total revenue grew by 2% compared to a year ago and reached $257 million, and the company is profitable with a 12-month EPS of $0.15. However, compared to the industry benchmark, it has a smaller gross profit margin, which is concerning, and the revenue growth, while positive, is small.
Snap (SNAP) calls itself a camera company. However, most people know the company by its social networking app Snapchat. Since going public in mid-2017, it has evolved its app in many ways. Starting from a simple image and video app, Snap has added image enhancing, ads, video content, games, and augmented reality capabilities. While seeing steady growth, Snap has recovered quite well from the low of March. Its recent earnings report shows that despite its struggles with profitability, sales growth is robust. However, the company's gross profit margin and 12 month EPS are both negative and lower than the industry benchmark.
While Sogou has a massively larger audience to tap into, Snap already has its position as a market leader and is widely popular in the U.S. among the younger crowd. Moreover, the company's focus on enhancing its platform beyond basic social media features and into augments reality capabilities are some of the features that may lead to its rapid growth in the future.