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STVI: Anticipating the Benefits of the Company’s Growth Initiatives

By M. Marin


Technology company Snap Interactive (OTC:STVI) strives to be a leader in social products that deliver live video through mobile platforms. The company already operates several prominent social networking and interactive dating applications that allow people to share live video. Following a 2016 merger that strengthened the company’s product portfolio and expanded its user base, Snap intends to develop and launch new live video social and dating applications to benefit from the growing popularity of the live video format and leverage the ongoing convergence of video and chat with online dating.

The company’s 2016 merger with privately-held AVM bolstered its position within live video. Snap believes that live video is on-track to become a key factor in social networking, messaging and online business applications and presents an attractive growth opportunity. Management expects its extensive base of approximately 183,000 active subscribers globally as of March 31, 2017 to create an opportunity to cross-promote and cross-sell live chat, as the company believes it has early mover advantage. Snap has invested about 15 years in developing and growing its live video social networking platform.

Since the merger closed, Snap has focused on leveraging the scale of the combined companies, reducing redundant expenses, consolidating corporate offices and cross-selling video and dating features. The company expects to realize significant cost savings. Management believes the extremely fragmented industry presents additional opportunities for growth through strategic M&A.

The company has also implemented several initiatives to strengthen its product portfolio, including rebranding legacy products and launching new ones. Snap also initiated litigation against two companies alleging patent infringement. The company has already successfully defended its patents and obtained licensing revenue from Sony, Activision and Microsoft.

Snap shares trade at a substantial discount to those of peers. If Snap can deliver growth on the initiatives discussed in our report, we would anticipate share price appreciation and that the valuation gap would narrow.


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