Snap Inc. (SNAP) is the parent company of one of the most popular and widely used social media platforms.
This is a camera and social media company with three major arms: Snapchat, Bitmoji and Spectacles. The company is worth roughly $120 billion. I am bullish on this stock.
Snap’s Q2 earnings report exceeded analyst expectations, as revenue doubled year-over-year. Moreover, the company posted a bullish outlook for the third quarter.
Although often overlooked, Snap has the potential to be one of the most highly valued social media platforms in the near future. Investing in this stock appears to be a smart move right now. (See SNAP stock charts on TipRanks)
Let’s dive into what could potentially drive outperformance over the medium- to long-term.
Impressive Q3 Outlook with Double-Digit Growth
Snap revised its third-quarter outlook after an impressive second-quarter performance. The company expects its Q3 revenue to come in between $1.07 billion and $1.09 billion. This would be a 58% to 60% increase year-over-year.
Snap has also stated that it expects its daily average user growth to hit 21% next quarter. This translates to expected daily active users of 301 million on the company’s social media platform.
AR has Boosted Snap’s Growth
Snap has focused on employing augmented reality (AR) for quite some time. In May, Snap introduced Spectacles, which are specialized glasses that allow users to enjoy immersive AR experiences.
The company also acquired Vertebrae in July, to further boost its abilities in providing world-class AR experiences. Vertebrae allows brands to create a 3D version of their goods for consumers to inspect before making a purchase.
The inclusion of AR has also contributed to increased growth in earnings. Notably, Wall Street has recently upped its earnings projections for Snap for the next two years.
Growth-Oriented Developments in Pipeline
The company announced in its latest investor’s event that Snap is well-positioned to grow at 50% annually for the next few years. It believes that new in-app games, newly launched AR lenses, self-service ads, and its social shopping platform will drive growth.
Snap is also considering including “Minis,” which would be mini programs incorporated into its app. Such programs would allow users to purchase products, order food, and make payments from the app itself. Similar programs have already been quite a hit for China’s WeChat.
Moreover, Snap has been working on introducing an in-app currency called Snap Tokens. These tokens would help Spotlight users to monetize their videos.
The company has recently expanded its Snap Map, which should help the platform to develop its location-based services further.
Wall Street’s Take
According to TipRanks analyst rating consensus, Snap stock is a Moderate Buy. Out of 27 analyst ratings, there are 19 Buy recommendations, seven Hold recommendations and one Sell recommendation.
The average SNAP price target is $87.04. The price targets range from a low of $67 per share, to a high of $110 per share.
With revenues of $982 million in Q2, an adjusted EBITDA improvement of 223% year-over-year, and 23% year-over-year growth in daily active users, Snap is headed on the right path.
The stock certainly looks like a viable long-term play right now.
Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article
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