In that context, the company's top-line miss and $72 million net loss aren't concerning to me - at least in the short term. Revenue was up 57% in the third quarter, but it also fell short of management's guidance and analysts' estimates. That valuation is quite optimistic in light of challenges on the horizon. Keith Noonan: Even after plunging 34% since reporting third-quarter earnings, Snap still has an $80 billion market capitalization, and shares trade at 20 times this year's expected sales. Bear Case: Snap is richly valued and faces tough competition And as Snap works to optimize revenue, the stock will continue to react sharply to quarterly earnings as the company is still unprofitable on a GAAP basis.

With just 24% and 14% smartphone market penetration in North America and Europe respectively, Snapchat has had issues reaching older users, but this also means Snap still has a long way to go until it reaches peak adoption. By doing this, it should see continued DAU growth. However, Snapchat still has a ways to go to before it catches up with the industry leader, Meta Platforms.Īs the current customer cohort ages, Snapchat can capture a new generation while maintaining the previous one. Due to this existing large audience, daily active users (DAUs) grew slower than revenue last quarter, up 23% to 306 million. Few companies have penetrated this lucrative advertisement demographic as well as Snapchat has. In these locations - which include the U.S., U.K., Australia, France, and the Netherlands - 90% of 13 to 24 year olds and 75% of 13 to 34 year olds use the app. The first growth phase was capturing users, something Snapchat has excelled at in its key markets. If Snap can maintain its phenomenal growth rate, gains for investors will likely follow. Management is guiding for around $1.2 billion in the current quarter, making it possible for Snapchat to crack annual revenue of $4 billion. Year to date, it has increased 77% to $2.8 billion. Third-quarter revenue grew 57% year over year to more than $1 billion. Snpachat is in its second growth phase: maximizing revenue. It also has programmed content with ads placed between segments, similar to television ads. Snapchat popularized filter use, which is just one way it generates revenue. Rather than scrolling through feeds or advertisements, the primary use is sending pictures back and forth to friends. Keithen Drury: Different than other social media companies, Snapchat is a communication platform.

IMAGE SOURCE: GETTY IMAGES Bull Case: Snap has captured a key demographic and is optimizing revenue

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