We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why SNAP Stock is a Buy Despite 27.5% Dip in a Year
Read MoreHide Full Article
Despite experiencing a 27.5% stock decline over the past year, Snap Inc. (SNAP - Free Report) continues to demonstrate remarkable resilience and strategic execution. The company's third-quarter 2024 performance, marked by a 15% year-over-year revenue increase to $1.37 billion, underscores its ability to grow despite challenging market conditions.
With projected fourth-quarter revenues between $1.51 billion and 1.56 billion, suggesting 11-15% growth, and the Zacks Consensus Estimates forecasting 16.28% revenue growth to $5.36 billion for 2024, Snap's momentum remains strong. The Zacks Consensus Estimate for earnings is pinned at 25 cents per share, indicating a robust 177.8% growth year over year, further strengthening the investment case. Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
1-Year Performance
Image Source: Zacks Investment Research
AI Innovation Driving Monetization
Snap's aggressive implementation of AI across its platform represents a significant competitive advantage and growth catalyst. The company's AI-powered chatbot has seen engagement triple quarter over quarter, while AI-enabled features in Snapchat Memories and advertising optimization demonstrate practical monetization of this technology. Despite challenges from Apple's (AAPL - Free Report) iOS privacy changes, Snap's enhanced first-party measurement solutions and AI-driven advertising improvements have helped maintain advertiser confidence, evidenced by the doubling of active advertisers year over year.
Strong User Metrics and Engagement
The platform continues to demonstrate impressive user growth, reaching 443 million daily active users in the third quarter of 2024, up 9% year over year. More importantly, total time spent watching content rose 25% year over year, while Spotlight achieved more than 500 million monthly active users. This sustained growth in both users and engagement, particularly among younger demographics where Snap maintains 75% penetration in developed markets, provides a solid foundation for future revenue expansion.
Diversified Revenue Streams and AR Leadership
Snap's revenue diversification strategy has shown remarkable success, with Snapchat+ reaching 12 million subscribers. The company's leadership in augmented reality, supported by 375,000 AR creators and developers who have created more than 4 million Lenses, positions it at the forefront of next-generation social media experiences. This technological advantage, combined with the launch of fifth-generation Spectacles and new ad formats like Sponsored Snaps and Promoted Places, creates multiple potential revenue streams.
Improving Financial Health and Operational Efficiency
The company's financial position has strengthened considerably, with adjusted EBITDA improving 229% year over year to $132 million in third-quarter 2024. A robust balance sheet featuring $3.2 billion in cash and marketable securities provides ample resources for continued innovation and growth. The company's ability to generate a positive free cash flow of $72 million demonstrates improving operational efficiency and disciplined cost management while maintaining strategic investments in AI and AR.
Compelling Investment Case for 2025
While Snap faces competition from tech giants like Meta Platforms (META - Free Report) , Alphabet (GOOGL - Free Report) and TikTok, its focused strategy on AI integration and AR innovation positions it uniquely in the social media landscape. The company's forward 12-month price-to-sales ratio of 3.08, slightly above the Zacks Internet - Software industry average of 3.05, reflects its growth potential and technological leadership. The current valuation, considering the 27.5% stock decline, presents an attractive entry point for investors looking to capitalize on the company's long-term potential.
Looking ahead to 2025, several catalysts could drive stock appreciation. The maturation of Snap's AI and AR investments, combined with its growing advertiser base and improving monetization metrics, positions the company for potential margin expansion and accelerated revenue growth. The successful execution of its advertising platform optimization through AI, coupled with new revenue streams from AR innovations, could significantly enhance financial performance.
For investors seeking growth opportunities in the technology sector, Snap presents a compelling investment case. The combination of strong user engagement, technological leadership in AR and AI, revenue diversification, and improving financial metrics suggests significant upside potential as these investments mature. While near-term challenges exist, particularly in the competitive digital advertising landscape, Snap's strategic focus and execution capability make it an attractive buy at current levels for investors with a long-term perspective on the digital media and technology sectors. Snap currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Zacks' 7 Best Strong Buy Stocks (New Research Report)
Valued at $99, click below to receive our just-released report predicting the 7 stocks that will soar highest in the coming month.
Image: Bigstock
Here's Why SNAP Stock is a Buy Despite 27.5% Dip in a Year
Despite experiencing a 27.5% stock decline over the past year, Snap Inc. (SNAP - Free Report) continues to demonstrate remarkable resilience and strategic execution. The company's third-quarter 2024 performance, marked by a 15% year-over-year revenue increase to $1.37 billion, underscores its ability to grow despite challenging market conditions.
With projected fourth-quarter revenues between $1.51 billion and 1.56 billion, suggesting 11-15% growth, and the Zacks Consensus Estimates forecasting 16.28% revenue growth to $5.36 billion for 2024, Snap's momentum remains strong. The Zacks Consensus Estimate for earnings is pinned at 25 cents per share, indicating a robust 177.8% growth year over year, further strengthening the investment case. Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
1-Year Performance
Image Source: Zacks Investment Research
AI Innovation Driving Monetization
Snap's aggressive implementation of AI across its platform represents a significant competitive advantage and growth catalyst. The company's AI-powered chatbot has seen engagement triple quarter over quarter, while AI-enabled features in Snapchat Memories and advertising optimization demonstrate practical monetization of this technology. Despite challenges from Apple's (AAPL - Free Report) iOS privacy changes, Snap's enhanced first-party measurement solutions and AI-driven advertising improvements have helped maintain advertiser confidence, evidenced by the doubling of active advertisers year over year.
Strong User Metrics and Engagement
The platform continues to demonstrate impressive user growth, reaching 443 million daily active users in the third quarter of 2024, up 9% year over year. More importantly, total time spent watching content rose 25% year over year, while Spotlight achieved more than 500 million monthly active users. This sustained growth in both users and engagement, particularly among younger demographics where Snap maintains 75% penetration in developed markets, provides a solid foundation for future revenue expansion.
Diversified Revenue Streams and AR Leadership
Snap's revenue diversification strategy has shown remarkable success, with Snapchat+ reaching 12 million subscribers. The company's leadership in augmented reality, supported by 375,000 AR creators and developers who have created more than 4 million Lenses, positions it at the forefront of next-generation social media experiences. This technological advantage, combined with the launch of fifth-generation Spectacles and new ad formats like Sponsored Snaps and Promoted Places, creates multiple potential revenue streams.
Improving Financial Health and Operational Efficiency
The company's financial position has strengthened considerably, with adjusted EBITDA improving 229% year over year to $132 million in third-quarter 2024. A robust balance sheet featuring $3.2 billion in cash and marketable securities provides ample resources for continued innovation and growth. The company's ability to generate a positive free cash flow of $72 million demonstrates improving operational efficiency and disciplined cost management while maintaining strategic investments in AI and AR.
Compelling Investment Case for 2025
While Snap faces competition from tech giants like Meta Platforms (META - Free Report) , Alphabet (GOOGL - Free Report) and TikTok, its focused strategy on AI integration and AR innovation positions it uniquely in the social media landscape. The company's forward 12-month price-to-sales ratio of 3.08, slightly above the Zacks Internet - Software industry average of 3.05, reflects its growth potential and technological leadership. The current valuation, considering the 27.5% stock decline, presents an attractive entry point for investors looking to capitalize on the company's long-term potential.
Looking ahead to 2025, several catalysts could drive stock appreciation. The maturation of Snap's AI and AR investments, combined with its growing advertiser base and improving monetization metrics, positions the company for potential margin expansion and accelerated revenue growth. The successful execution of its advertising platform optimization through AI, coupled with new revenue streams from AR innovations, could significantly enhance financial performance.
For investors seeking growth opportunities in the technology sector, Snap presents a compelling investment case. The combination of strong user engagement, technological leadership in AR and AI, revenue diversification, and improving financial metrics suggests significant upside potential as these investments mature. While near-term challenges exist, particularly in the competitive digital advertising landscape, Snap's strategic focus and execution capability make it an attractive buy at current levels for investors with a long-term perspective on the digital media and technology sectors. Snap currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.