One of the more enjoyable aspects of my role involves tracking various key growth stocks within the market. Not every stock merits buying or holding, of course, but they are certainly interesting to follow.
With that in mind, there’s a particular stock I’ve had my eye on as a potential new addition: the parent company of Snapchat, Snap.
There’s been discussion around whether AI might create the world’s first millionaire, tied to a relatively obscure company considered an “essential monopoly” that supplies vital technology for major players like Nvidia and Intel.
Now, you might be wondering if this is a surprise. Frankly, I was a bit taken aback myself. Snapchat, as a smaller player in the social media space, hasn’t garnered much attention since the end of the COVID-19 pandemic, and its stock performance reflects that struggle.
But here’s the intriguing part: despite the challenges, the company experienced a revenue increase of 11% last year. Additionally, EBITDA rose by 36% year-over-year, and their net loss for 2024 diminished by 34%. Analysts predict a continuation of this trend, with slight growth expected through 2028.
It’s worth connecting the dots here. After 14 years, Snap seems to be finding its footing with a viable business model. This model combines a free-to-use, ad-supported platform with a subscription service, Snapchat+, which now has around 24 million users, allowing for revenue generation from smaller content creators.
And there’s something else brewing: the attention of activist investor Irenick.
Activist investors often get a bad rap for interfering, but in this instance, their involvement hints at untapped potential for Snap. Irenick posits that the company’s worth could soar to $35 billion, a significant leap from its current market cap of $8 billion.
That said, there’s still a substantial risk involved. Nevertheless, the potential for gains seems considerable. Snap is one of the few stocks that hasn’t rebounded since its lows in 2022 or earlier this month, when the broader market began its uptick. From my perspective, it feels like the market might be overly fixated on the risks while undervaluing Snap’s upside.
Before considering an investment in Snap, here are a few things to think about:
