- Snap Inc (NYSE:SNAP) stock has been the target of heavy selling pressure lately.
- The Snapchat community is highly active and the company is demonstrating global revenue growth.
- Investors should consider a starter position in the shares.
Snap Inc is best known for its multi-function camera app called Snapchat. Despite the platform’s popularity among young social media users, SNAP stock hasn’t exactly been a hit on Wall Street in recent months.
Regardless of a powerful 10% gain on March 16, the Snap share price is still much closer to its 52-week low of $24.32 than its 52-week high of $83.34. At the same time, Deutsche Bank recently initiated coverage of the stock with a “buy” rating and a fairly ambitious $45 price target.
Could $45 be just a stepping stone to a revisit of SNAP stock’s 52-week peak? If so, then perhaps it’s time to snap up some shares before the window of opportunity closes.
Snap Inc Is as Strong as Ever
Deutsche Bank analyst Benjamin Black asserted that Snap offers investors a favorable risk-to-reward profile. He built a strong argument, stating that Snap’s daily active user (DAU) growth “appears as strong as ever, driven by (1) content investments, (2) new feature rollouts, (3) international expansion, and (4) supportive network effects across younger demos.”
Black also cited Snapchat’s “reach advantage across Millennials and Gen Zs.” It would have been great to see a breakdown of Snapchat’s DAU expansion across different age demographics, but the company’s fourth-quarter and full-year 2021 results didn’t go into that level of detail.
The platform’s DAU growth is undeniable, however. Amazingly, Snapchat’s DAUs totaled 319 million in Q4 2021, marking a 20% year-over-year increase.
This wasn’t a fluke, by the way. For five consecutive quarters, Snapchat’s year-over-year DAU growth has equaled or exceeded 20%. Moreover, in terms of revenue expansion, Snap is firing on all cylinders. Year-over-year, the company grew its revenue in North America, in Europe and globally — and each of those by more than 40%.
What Happened to SNAP Stock?
Even though Snap’s social media platform is quite popular, investors have seemingly turned against the company.
They might have had doubts about whether Snapchat would continue to be popular after Covid-19 lockdowns were lifted. After all, those lockdowns helped attract some people to social media as a pastime.
Yet, it appears that Snap has adapted well to a changing market environment. As Black suggested, the new feature roll-outs have helped keep Snapchat relevant.
Among the most important features are the Lenses, which are part of Snapchat’s augmented reality features. As the company reported, its 18 New Year’s Eve Lenses generated over 7 billion impressions.
And here’s a feature you won’t see in other social media platforms: Snap has introduced Food Scan, a Snapchat camera feature which is “uses the powerful visual recognition capabilities of Scan to understand different food and ingredients and provide recipe recommendations.”
In other words, Snap is still innovating and willing to think outside of the box. It’s almost inexplicable, really, that the company’s shares are still fairly close to their 52-week low.
How to Approach SNAP Stock Moving Forward
Even after a 10% single-day gain, it’s still a good idea to start with a small position in SNAP stock. $45 is a reasonable 12-month price target, but you’re not obligated to take profits there.
A revisit of the prior peak is probably in the cards, so feel free to accumulate the shares gradually throughout 2022, especially if the price dips lower.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
