If you add up the market values of the 44 NYSE and NASDAQ application software companies as defined by Yahoo Finance under $1.5 billion (we can quibble with Yahoo’s taxonomy, but it will suffice for this example), you’d have about $25 billion in equity market cap. Or you could have all of the stock of Snap, which will start trading today and, at its IPO price of $17 per share, is worth $24 billion — making it the 6th largest application software company in the US.
(Yes, we know that Snap calls itself a camera company. But I think they’d much prefer the application software multiple, don’t you?)
Is Snap worth $24 billion? Honestly, I have no idea. But then again, I’m not remotely part of their target market. I’m not one of the 158 million daily Snapchat users who are taking 2.5 billion Snaps each day. I’m not familiar enough with the dynamics of this user base (which is growing, but that growth is slowing) and the challenges of unlocking and monetizing the value of these users through advertising. I’ll leave that question to experts like Martin Hoffmann, who posted a terrific analysis of the company’s prospects and challenges yesterday.
Our time is much better spent examining small and micro cap application software companies that are developing the next generation of software-as-a-service (Saas), cloud and mobile applications. Whereas some may question the value of Snap at this level, it’s hard to argue with the future potential of these smaller companies.
A few names we’re watching post-earnings include CYREN (CYRN), Marin Software (MRIN) and Support.com (SPRT).
CYREN (NASDAQ: CYRN) – The company has posted six straight quarters of revenue growth, and its Cyren Cloud Security (CCS 4.0) platform is scheduled for release by the end of this quarter. $82 million market cap.
Marin Software (NASDAQ: MRIN) – The company’s shares traded lower after this week’s Q4 numbers release, but maybe the worst is over. Marin was named as the number one mobile advertising software solution for enterprise, mid-market, and small business in G2 Crowd’s Mobile Advertising rankings. $78 million market cap.
Support.com (NASDAQ: SPRT) – The company effected a reverse split in January to meet NASDAQ’s minimum bid requirement, and we’re interested to see if CEO Rick Bloom can continue to rein in expenses at this cloud-based tech support provider. $40 million market cap.
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