Shares of popular social-media and camera tech company Snap (SNAP) bounced back in a hurry, rising nearly 60% in a single day following the release of some better-than-feared quarterly earnings results.
The big snap-back came just a day after investors fell in sync with social-media leader Meta Platforms (FB) after it unveiled some subtle weakness in daily active users. Indeed, Meta CEO Mark Zuckerberg pointed the finger at rival TikTok, but it was Snap that may have been an equally disruptive force.
Snap Stock Snaps Back
Unlike Meta, which was knocked down by Apple (AAPL) and its recent iOS changes, Snap showed resilience. Indeed, Snap, a social-media platform popular with younger consumers, seems like more of a competitor of TikTok than Facebook. In any case, many people have turned against Facebook, with much of the backlash still remaining, even after the company (prematurely) changed its name to Meta.
Sure, Meta is a better representation of where Zuckerberg sees his company headed next. Still, with the metaverse potentially years away, it certainly seems as though the significant name change should have happened after the metaverse started paying a more meaningful chunk of the bills.
Some believe the metaverse is a pipedream. It very well may be five or even eight years away from becoming widely adopted. Though it is worth noting that the pandemic has likely accelerated virtual and augmented reality technology.
Snap, Not Meta, May Be the Metaverse Stock to Own
Regardless of when the metaverse will be ready for your average consumer, Snap seems like a better metaverse company than Meta. The company has been busy at work with its camera tech over the years. Although Meta’s Oculus acquisition has hogged headlines, I do think that Snap’s rival hardware offerings could prove a worthy challenger.
Still, few firms can stand up to the likes of Apple when it comes to consumer hardware. Indeed, there’s a considerable risk that headsets, goggles or glasses developed by either Snap or Meta could be at risk of becoming a device akin to the BlackBerry (BB) in the early days of smartphones.
Competing with the largest company on the planet is not a good idea. Still, Snap’s platform, intriguing software, and innovative capabilities are the main attractions to the firm, now and whenever the metaverse is ready to go. With Snap stock up around 65% in a week, I’m hesitant to chase it post-earnings. That said, shares are still over 50% off their highs. As such, I’m staying bullish on SNAP.
Snap’s Decent Fourth Quarter Leads to Collective Sigh of Relief
Snap beat on the top- and bottom-line, with solid user growth and resilience in the face of Apple’s iOS changes that proved devastating to Facebook. SNAP revenue was up 42% year-over-year, alongside a decent 20% year-over-year jump in daily active users. Indeed, Snap’s sympathetic tumble on Facebook’s flop proved utterly unwarranted.
With no signs of a user slowdown, Snap could begin to creep up on Facebook, which could start to see its lousy reputation begin to catch up to it and really weigh on its fundamentals. Facebook’s losses look to be Snap’s opportunity to gain.
Moving ahead, Snap will need to keep its innovative spirits alive if it’s to continue growing DAUs at the expense of rivals, including TikTok. Indeed, Snap’s Stories showed that the company was willing to take chances to gain an edge. Although the feature has been shamelessly copied, I do think Snap has more original ideas that could be harder to copy once the metaverse finally arrives.
Wall Street’s Take
According to TipRanks’ consensus analyst rating, SNAP stock comes in as a Moderate Buy. Out of 28 analyst ratings, there are 18 Buy recommendations and 10 Hold recommendations.
As for price targets, the average Snap price target is $54.08, implying an upside of 37%. Analyst price targets range from a low of $36.00 per share to a high of $93.00 per share.
The Bottom Line on Snap Stock
For now, many will discount the camera and augmented reality side of Snap’s business. This could change once the metaverse is finally ready to go. In terms of which social stock is best-equipped for the new era, I’d put my money on Snap over Meta.
In the meantime, I am watching SNAP stock starting to cool off, as the post-earnings run was a bit exaggerated. Snap’s fourth quarter was solid, but the collective sigh of relief made it look better than it was.
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