Snap Can Hit $50 as Augmented Reality Innovations Drive Growth

SNAP stock - Snap Can Hit $50 as Augmented Reality Innovations Drive Growth

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With several growth catalysts on the horizon, the positive momentum in Snap (NYSE:SNAP) should sustain. SNAP stock touched lows of $24.32 at the beginning of February. With strong numbers for the fourth quarter of 2021, it surged to about $37.40 in the blink of an eye.

In news that could spice up price action across the social media sector, Elon Musk has taken a passive stake of 9.2% in Twitter (NYSE:TWTR). TWTR stock surged by almost 25% in pre-market action. SNAP stock was also higher by 1.3% before the market opened.

It’s worth noting the analyst community is already bullish on SNAP stock. The median 12-month price forecast from 34 analysts is $52. This would imply upside potential of 37.5% from current levels. The current momentum reversal is likely to take the stock above $50 levels in the next few quarters, if not sooner.

Recently, Snap was rated to be the most innovative company when it comes to augmented reality (AR). Plus, last month, it acquired a neurotech startup called NextMind. This will help drive the company’s long-term AR research efforts.

Additionally, Benchmark analyst Mark Zgutowicz believes Snap is best positioned to capture incremental digital advertising market share in the coming years.

It’s worth noting that for Q4 2021, Snap reported an average revenue per user (ARPU) of $9.58 in North America. However, the ARPU from the rest of the world was $1.12.

With strong monthly active user (MAU) growth outside the U.S. and Europe, Snap is positioned for higher free cash flows as ARPU improves on the back of advertising income growth. Recently, Piper Sandler analyst Thomas Champion opined that Snap has “compelling pockets of user growth” in international markets.

For Q1 2022, Snap provided revenue guidance of $1.06 billion (mid-range). On a year-over-year basis, revenue growth is expected to come in at 37%. Strong growth coupled with the possibility of a sustained increase in free cash flows would imply a positive outlook for the stock.

Overall, SNAP stock seems to have bottomed out in February. With strong quarterly numbers and a bullish analyst outlook, it is likely to trade above $50 in 2022.

On the date of publication, Faisal Humayun did not hold (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 Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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