The news of X (formerly Twitter) being internally valued at $19 billion has generated considerable discussion and raised eyebrows among critics. The significant decrease in valuation from the $44 billion that Elon Musk paid when he acquired the social network has led to speculation and comparisons with other social network companies.
Key Takeaway
The new valuation of X raises questions and debate regarding its decline in value since its acquisition. Comparisons with Snap’s valuation provide some context, highlighting both similarities and differences between the two companies. Snap’s Q3 results show a return to revenue growth but continued unprofitability on a GAAP basis. However, adjusted metrics suggest that Snap is on a path towards profitability. These factors contribute to the ongoing speculation surrounding X’s new valuation.
A Comparison with Snap’s Valuation
One notable comparison is with Snap, another social network company that has had its fair share of ups and downs. According to Yahoo Finance data, Snap is currently valued at $15.97 billion, which is relatively close to X’s new internal valuation.
While there are notable differences between Snap and X, such as their respective features and services, they also have similarities. Both are smaller social networks in a landscape dominated by Meta (formerly Facebook). Additionally, they have experienced challenges with declining revenue, offer subscription products, operate significant advertising businesses, and prioritize mobile platforms. It is worth mentioning that both companies also carry substantial debt.
Examining Snap’s Q3 Results
Looking closely at Snap’s third-quarter financial results may provide some insights into whether X’s new valuation is reasonable, inexpensive, or ambitious.
Snap experienced a decline in revenue during the first two quarters of the year, but it returned to growth in Q3, with a 5% year-over-year increase in top-line revenue, reaching $1.19 billion.
On the GAAP side, Snap remains unprofitable, with a net loss of $368.3 million in Q3 2023, which was similar to the previous year. However, the company’s operating loss decreased from $435.2 million in Q3 2022 to $380.1 million in its most recent period.
When adjusting for certain accounting factors, Snap managed to achieve profitability. It reported adjusted EBITDA of $40.1 million in Q3 2023, showing a 45% decline compared to the previous year. Additionally, the company generated positive operating cash flow of $12.9 million, although its free cash flow turned negative in the third quarter.
