If I told you in late 2018 that social media company Snap (NYSE:SNAP) would be one of the market’s hottest stocks in 2019, you probably would’ve laughed at me. After all, in December 2018, SNAP was a $5 stock that had lost about 80% of its value over roughly 18 months.

But that’s exactly what has happened. SNAP stock has turned into one of the market’s biggest winners in 2019. So far this year, SNAP stock price is up about 200%.

The big question is:  will the rally of Snapchat stock continue?

In order to answer that question, we need to first answer five other questions which will give us more insight into how big Snap’s opportunity is, how much of that opportunity Snap will capture, and how much higher SNAP stock price can go.

How Much International Growth Potential Does Snap Have?

One of the core tenants of the bull thesis on SNAP stock is that this company’s overseas user base can increase tremendously.

The logic behind this belief is pretty solid. For a long time, Snap had a bad Android. app, but it recently revamped its Android app, and it’s finally good. Most overseas consumers utilize Android . Thus, Snap’s Android revamp should improve the experience of a ton of its international users. That, in turn, could enable Spark’s international growth to accelerate for a long time.

Recent data supports this thesis. Following the Android revamp, Snap added 9 million international users in the second quarter versus the first quarter, its largest sequential net increase of overseas users in a long, long time.

But, on the other hand,  Snap is jumping into an international market that is already saturated with Stories apps. Specifically, Facebook’s (NASDAQ:FB)  Facebook, Instagram, WhatsApp, and Messenger apps all have Stories. Thus, why would overseas consumers who are already using any of those four apps to communicate with Stories jump to Snapchat because of the revamp of its Android app?

They might not. As a result, there are some question marks surrounding just how much more Snap’s international user base can realistically grow.

Will Young Consumers Stick With Snap As They Grow Up?

A core tenant of the bear thesis on SNAP stock is that  it’s a “kids only” app. That is, no one over the age of 35 uses the app, and those are the consumers with most of the money, so being dominant among teenagers really isn’t that valuable.

Bulls reply by telling bears to take a look at Facebook (NASDAQ:FB). That was a “kids only” app at one point in time. Now, over 2 billion people use it all around the world. Bulls argue that Snap will retain its users, too.

I have a tough time buying that argument. Facebook launched at a time when there were very few other social media platforms. Thus, as consumers went from their 20s to their 30s, there was no other social media platform to “graduate” into, so consumers just stuck with Facebook. Today, there are plenty of social media platforms which consumers can “graduate” into as they grow older: Instagram, Facebook, Twitter (NYSE:TWTR), etc.

As a result, I still have a tough time buying the argument that there will be a bunch of 30- to 40-year-old consumers running around in five to ten years, snapping each other with as much frequency as they used when they were in their 20s. Instead, I think Snap will forever largely be a “kids only” app.

How Valuable Are Young Users to Advertisers?

Assuming that Snap does largely remain a “kids only” app for the foreseeable future, then one has to ask just how valuable being a “kids only” app is.

After all, kids don’t make much money. Sure, they are heavily influenced by what they see on social media and in digital ads. But they don’t have much purchasing power. As a result, SNAP stock bears argue that Snap’s hold on Generation Z isn’t all that valuable, unless SNAP maintains that advantage as those consumers get older.

There’s merit to that argument. However, brands aren’t going to stop spending an arm and a leg on advertisements targeted to Generation Z. Ads get people to think more about companies’ products, and that’s reason enough to justify the spending.

As a result, having a hold on young consumers should prove to be pretty valuable for Snap in the long-run. though not as valuable as attracting other demographics like Facebook and Twitter have,. As a result,  Snap’s unit revenues look poised to be lower at their peaks than those of FB and TWTR.

Where Will SNAP’s Margins End Up?

One important question regarding Snap’s long-term profit potential relates to where exactly its margins will be at the end of the day. Specifically, where will its gross margins wind up?

Snap hosts a lot of expensive content. Storing and saving videos and photos in data centers is a lot more expensive than storing and saving texts. Considering pretty much all of Snap’s content is photos and videos, the company presumably will have a higher hosting cost rate than pretty much all of its peers.

Indeed, Snap’s gross margins are depressed today. They are making progress, and they will continue to make progress for the foreseeable future. But will Snap’s margins hit Facebook-type 80%-plus levels? Probably not, both due to Snap’s lack of size and its higher content hosting rates.

What Does  Snap Stock Price Reflect Today?

Perhaps the biggest question has to do with the valuation of Snap stock;  how much is priced into SNAP stock today?

Snap has around 200 million daily active users. Twitter has around 140 million daily actives. Yet the market cap of SNAP stock is about 30% below Twitter’s market cap.

From that perspective, SNAP stock may actually be undervalued.

But each of Twitter’s users generates way more value than each of Snap’s users. Specifically, over the last 12 months, Snap’s users have produced an average of about $6 of revenue and no profits. Each user on Twitter has produced an average of over $24 in revenue and tons of profit.

Of course, the bull thesis on SNAP stock is that one day, Snap’s users will generate as much revenue and profits as Twitter’s users, and that because Snap has more users than TWTR, it will be more valuable than Twitter. But that scenario probably won’t materialize, given the demographic and content differences I outlined above. If it ever happens, it will take  five to ten years to materialize.

Thus, SNAP stock is richly valued. Yes, there’s runway for it to grow into the valuation. But there’s also plenty of room for SNAP to fall if the company doesn’t execute as expected.

The Bottom Line on SNAP Stock

I think SNAP is a company that has been firing on all cylinders, but whose future growth outlook relies on a lot of hope, which is clouded by fundamental challenges.

I’m not convinced the company’s international opportunity is that tremendous, given that Facebook’s properties already dominate that market. I’m also not convinced that Snap’s user base will stick with it as they grow up, nor am I convinced that Snap can extract that much value out of each user if its user base forever consists of mostly young and broke consumers. Margins are also a big question mark for SNAP stock going forward.

The valuation underlying SNAP stock seems to ignore all these risks. But perhaps Snap will execute exactly as expected, and maybe Snap will become the next big thing in social media.

I just have a tough time believing that scenario now. There are too many risks facing SNAP stock, and not enough of those risks are reflected by SNAP stock price. As a result, I’ll watch the Snap show from the sidelines. Hopefully, I won’t be kicking myself in a year.

As of this writing, Luke Lango was long FB.