High Monthly User Count Revealed at Snap Investor Day, but Double-Digit Sales Growth a Year Away

Snap reaffirmed a few things at its second analyst day that we have noticed recently, including the strengthening of a network effect as the user count grows, offset by weak engagement and continuing softness in monetization—whether due to Apple’s policies or the economic environment. While newer growth opportunities remain, such as Snapchat+, Snap Map, and the increasing adoption of augmented reality ads, we believe the firm’s impressive user growth should make improvements in advertising products to bring more advertisers on board the firm’s highest priority. Our fair value estimate remains $16, which represents over a 50% upside from where the stock is trading.