Social-media firm Snap (SNAP) has been under considerable pressure since late September, with shares now off around 44% from its peak just north of $80 per share. Now down around 7% year to date, the stock looks to be in a great position to snap back, as investors and analysts draw even more focus to the metaverse. Indeed, the metaverse was a major buzzword this year.
As it comes closer to becoming a reality for the average consumer, though, there are reasons to really consider the trend by taking a deep dive into the many able tech firms ready to make the jump into virtual or augmented realities.
Snap strikes me as an undervalued innovator whose metaverse prospects could pay off big once mixed-reality headsets begin to phase out smartphones. As such, I remain bullish on SNAP stock. (See Analysts’ Top Stocks on TipRanks)
Snap’s Opportunity to Gain an Edge over Meta in Metaverse Transition
Undoubtedly, Meta Platforms (FB) and its CEO Mark Zuckerberg are going after the future of the metaverse with their wallets.
Big acquisitions and prudent investment have equipped the firm to build something special. That said, it will likely take more than just an impressive R&D budget to dominate the metaverse, especially once a must-have piece of hardware finally lands.
Meta, formerly Facebook, doesn’t exactly have a sparkling reputation either after yet another year of brutal headlines. Facebook (or Meta) was won the unenviable title of “Worst Company of 2021” in a recent survey on Yahoo! Finance.
Such distaste for the company may impair the firm’s ability to truly excel in the metaverse. Though, it remains to be seen whether people are willing to forgive the company as it continues innovating and righting its wrongs. In due time, people will forgive the company if it shows it has, in fact, changed its ways.
In any case, such an aura of negativity should work in Snap’s favor as it looks to bring the competition to its rival to the next level. A transition into the metaverse is the perfect time to gain, as user engagement time will be up for grabs. In the metaverse, it’ll be about truly next-level experiences, and to offer such, a firm needs next-generation technological capabilities.
Like Meta, Snap has invested a considerable amount in headsets and software built for a virtual future. Indeed, Snap has really hit the spot with younger audiences, most notably millennials, with their fun and funny AR filters. Such features aren’t just a silly gimmick. They’re getting better with time, and they will become something incredible once the metaverse goes mainstream.
Meta has similar technologies, but arguably, Snap has more innovation to show right now. Still, it will be interesting to see the new technologies coming out of Meta’s pipeline. They could easily be as good or even better than that offered by Snap.
A Perfect Hardware Solution Could Be “The” Metaverse Catalyst
The metaverse doesn’t need a headset or pair of perfect goggles to take off, but it would sure help.
In terms of hardware, Meta has its Oculus line of VR devices, and Snap has its own AR-enabled Spectacles. Still, neither device has proven to be a breakthrough device as the Apple (AAPL) iPhone was around 13 years ago.
With rumors pointing to Apple releasing a mixed-reality headset in late-2022 or early-2023 (probably the latter, given the potential for Omicron-induced supply chain pressures), the metaverse looks primed.
It’s tough to gauge the Total Addressable Market (TAM) and the timing (many thought it was further off than 2022) of the metaverse. That said, it could have tremendous potential to surprise to the upside, and it’s probably closer than many think, given the pandemic has likely acted as an accelerant for such next-generation technological trends.
Personally, my money would be on Apple as a metaverse play. Still, Snap and its AR innovations are definitely worth considering, as they grow in value come the metaverse’s big moment.
With Snap stock fresh off a vicious decline that saw it nearly cut in half from peak levels, the price of admission is modest. Most analysts are sticking with their Buy ratings, too, making Snap a very intriguing pick-up amid the Nasdaq 100’s latest sell-off.
Wall Street’s Take
Turning to Wall Street, SNAP stock comes in as a Buy. Out of 27 analyst ratings, 21 Buys and six Holds were assigned in the past three months.
The average Snap price target is $73.92, implying 58.2% upside potential. Analyst price targets range from a low of $53.00 per share to a high of $104.00 per share.
Disclosure: Joey Frenette owned shares of Apple at the time of publication.
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