Snap (SNAP), the developer of popular social media platform Snapchat, has been in the middle of a lot of speculation recently, mostly regarding its lackluster growth prospects in the upcoming metaverse (a virtual reality space). Moreover, a tepid Q3 failed to bring any excitement among investors.
Nonetheless, there are several inputs investors should take into account before making decisions on the stock. (See Analysts’ Top Stocks on TipRanks)
Snap’s immersive experience platform, Snapchat, makes it one of the most preferred social networking platforms among the Millennial and Gen Z generations. As stated by the company last month, 75% of 13-34-year-olds in the United States use Snapchat, making it a more widely used platform than Meta (FB), Instagram, and Twitter (TWTR) within this demography.
In March this year, Snap and Oxford Economics jointly researched the importance of Gen Z in the post-pandemic recovery journey of the digital economy across Australia, France, Germany, the Netherlands, the United Kingdom, and the United States.
The study found that Gen Z is on track to dominate the workforce with the number of employed individuals across the six markets trebling to 87 million by 2030. Importantly, these zoomers are expected to bring in $3.1 trillion of consumer spending in these markets in 2030.
This spells good news for the company because of its popularity among zoomers, as well as the fact that their engagement on the platform and spending behavior will attract more advertisements, in turn boosting ad revenues.
Advertisements Hold the Key
Advertisements are the primary source of revenue for Snap.
Snap’s transition to an automated or programmatic auction of Snap Ads is a key ad-revenue driver. The company’s advertising products include Snap Ads, Sponsored AR (augmented reality) Lenses, and Sponsored Geofilters.
Additionally, Snap’s new ad format, Story Ads, allows advertising partners to engage better with audiences, and is expected to be a key revenue driver.
Moreover, another ad tool that is gaining traction is Snapchat’s new conversion tracking tool, Snap Pixel, which helps advertisers to track the traffic on their websites stemming from ads on Snap.
Website Traffic on Snapchat Improving?
With the help of TipRanks’ Website Traffic tool, we found that visits from unique visitors to Snap’s Snapchat platform have been steadily rising since August.
Moreover, when we looked at the quarter-to-date period, we saw that there has been a 9.6% jump in unique website visitors from the same period last year.
These trends have possibly been influenced by Snap’s sustained focus on user engagement.
Wall Street’s Take
Tuesday, Morgan Stanley analyst Brian Nowak reiterated a Buy rating on Snap’s stock. However, he reduced its price target to $65 from $85.
Nonetheless, the average Snap price target among Wall Street analysts is $75.13, indicating an upside potential of 51.1%. The consensus rating for the company is a Strong Buy, based on 20 Buys and six Holds.
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Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.
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