We recently published a list of 10 Best Augmented Reality Stocks To Buy Now. In this article, we are going to take a look at where Snap Inc. (NYSE:SNAP) stands against other best augmented reality stocks to buy now.
According to a report by Mordor Intelligence, the global augmented reality (AR) market has a market size of $42.48 billion as of 2024. The market is expected to grow at a compound annual growth rate (CAGR) of 42.36% and reach $248.38 billion by 2029. The Asia Pacific region is expected to be the fastest-growing market, but the largest market for the domain is anticipated to be North America.
A significant portion of the market is mobile AR, which leverages the globally spread use of smartphones, tablets, and other smart devices. Estimates show that around 1.7 billion devices are capable of supporting mobile AR as of 2024. The widespread and massive existing smartphone user base lends mobile AR a key advantage.
While AR glasses such as Orion have to face steep challenges to establish themselves as a widespread global phenomenon, mobile AR benefits from “zero-cost” hardware as a majority of people around the globe already own smart devices. A well-known example is Pokémon GO, a 2016 video game where players explore their surroundings to find virtual characters on their phones. The game quickly became a global sensation due to its existing hardware: mobile phones.
Future Trends in the Augmented Reality Industry
Although the AR market is around a decade away from attaining its full potential, several technological advancements in the industry are accelerating its pace. Tech giants have been running after the dream of AR and mixed reality for years, and are investing billions of dollars in the endeavor. According to SkyQuest, the largest investment is being poured into training and industrial maintenance, with figures reaching as much as $4.1 billion in the field of AR. Apart from this, private firms, VCs, and even some governments are financing AR research institutes and teams.
The primary user base of augmented reality includes industries such as aerospace and defense, healthcare, consumer, and retail. Hospitals and other medical care startups are continually taking strides in employing immersive modalities to help healthcare professionals. With surgeons increasingly relying on AR to tackle the potential risks of healthcare procedures, the rate of errors in the industry is expected to continually fall, and so is the number of potentially unsafe surgeries. According to SkyQuest, the AR segment in the healthcare industry is expected to reach $1.2 billion by 2024.
Another expected future trend in the industry is the increased application of AR in the automotive industry. With autonomous vehicles becoming more common across the globe, the integration of AR in these vehicles is supporting the broader AR industry. Through overlaying digital data in the real world, AR technology helps improve the driver and the autonomous system’s comprehension of their environment. In addition to several other features, consumers can interact with virtual 3D models of vehicles with the help of AR technology in showrooms, allowing them to visualize several customizations.
Our Methodology
In this article, we reviewed online rankings and ETFs to determine 25 companies operating in the AR space. We then selected the 10 most popular stocks among elite hedge funds. We sourced the hedge fund data from Insider Monkey’s database, as of Q3 2024. Our focus was on companies producing AR-related hardware, software, or technologies used to develop augmented reality products. However, we also included companies that offer services essential to the AR industry, like semiconductor chips.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A young adult family using a Camera to record moments of their daily life.
Snap Inc. (NYSE:SNAP)
Number of Hedge Fund Holders: 34
Snap Inc. (NYSE:SNAP) is a technology company that runs Snapchat as a visual messaging social application. Snapchat is the company’s core mobile application that employs augmented reality in its various “Lenses.” AR is continually driving engagement on Snapchat. According to Snap Inc.’s (NYSE:SNAP) fiscal Q3 2024 earnings, more than 375,000 developers, creators, and teams from all across the globe have built over 4 million Lenses on the app. For instance, its Past and Future Me AI Lens was viewed over 650 million times in fiscal Q3 2024. The lens allows users to see what their younger and older versions might look like.
The company is building on this AR momentum and has created several generative AI capabilities in Lens Studio, the company’s free design, development and distribution tool for creating AR experiences. These capabilities include Easy Lens, an innovative GenAI tool that creates AR experiences within minutes. Snap Inc. (NYSE:SNAP) is also releasing a new array of GenAI Suite features in Lens Studio, including innovative animation tools that mix different animations together to create full 3D characters. The company is receiving positive response to its Lens Studio innovations, and plans to chase long-term success in the AR industry through its vibrant creator and developer ecosystem.
Furthermore, Snap Inc. (NYSE:SNAP) introduced the fifth generation of its Spectacles in fiscal Q3 2024. These see-through, standalone augmented reality glasses allow developers to use AR Lenses and explore the world with their friends in unique ways. Snap OS powers Spectacles, which is the company’s new operating system specialized to mimic natural interactions between people. Developers can create immersive AR experiences with Spectacles, and can even browse the internet, interact with My AI, and get their work done from anywhere with multiple screen layouts. AR partners and developers are already developing AR experiences for Spectacles, including Peridot, a unique and friendly AR pet from Niantic, and BRICKTACULAR BY The LEGO Group.
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.”
Overall, SNAP ranks 10th on our list of best augmented reality stocks to buy now. While we acknowledge the potential of augmented reality stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SNAP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
