7. Snap Inc (NYSE:SNAP)
Number of Hedge Fund Investors: 45
BofA added Snap Inc (NYSE:SNAP) in its list of best of breed stocks. Over the past one year, SNAP shares have gained about 50% in value. Snap Inc (NYSE:SNAP) has been a surprising rebound story over the past few months as Snap Inc (NYSE:SNAP) earnings and growth have surprised analysts. Snap Inc (NYSE:SNAP) is fast becoming an AI stock that needs more attention than it’s currently getting. Snap Inc (NYSE:SNAP) has integrated ‘My AI’ chatbot with its app and it’s getting a lot of traction. The bot helps Snap Inc (NYSE:SNAP) users plan trips, answers questions, makes customized recommendations and much more. Snap Inc (NYSE:SNAP) also revealed a feature that would allow creators to convert any text prompt into a “lens.” Snap Inc (NYSE:SNAP) is also investing heavily in machine learning to increase engagement on its platform. New features like Creative templates, longer video formats will increase engagement on Snapchat, analysts believe.
Snap Inc’s (NYSE:SNAP) Q1 results show the growth trajectory the company is on. Time spent on Spotlight, Snapchat’s short viral videos feature, jumped 125% year over year in the first quarter. Snapchat+, Snap’s subscription service that unlocks special features on the app, tripled to nine million in the March quarter. Small and medium-scale advertisers on the platform jumped 85% on a YoY basis. Snap Inc (NYSE:SNAP) earnings are expected to continue seeing growth on the back of AI and core business growth catalysts. Wall Street expects Snap Inc (NYSE:SNAP) to post an EPS of $0.25 this year and $0.43 next year. Earnings growth is expected at over 70% next year.
RiverPark Large Growth Fund stated the following regarding Snap Inc. (NYSE:SNAP) in its first quarter 2024 investor letter:
“Snap Inc. (NYSE:SNAP): SNAP was our top detractor in the quarter despite reporting fourth quarter results generally in line with or better than expectations. Revenue growth of 5% was roughly in line with investor estimates and at the high end of guidance, and EBITDA of $159 million was $49 million better than estimates. Daily Active Users (DAUs) were also ahead of investor expectations, ending the quarter at 414 million (about 2 million better), driven by continued innovation in Snap’s offerings. Revenue guidance for 1Q24 was also roughly in line with investor estimates, but EBITDA guidance of negative $55-95 million was well below estimates. The company pointed to increased infrastructure costs and a US focused marketing campaign for the lower-than-expected margin guidance.
Although the company continues to face near-term macro headwinds, we believe SNAP can accelerate its revenue growth over the next several years. With 2023 revenue expected to be $4.6 billion (as compared with Meta’s $134 billion), we believe SNAP has a long runway for both revenue growth and expanded profitability as it improves platform functionality, continues to grow its audience (daily active users continue to grow at a double-digit rate), and expands its monetization.”