Snap Is Still Awaiting an Ad Spending Boost As Users and Engagement Increase

Snap is the maker of one of the most popular social networking apps, Snapchat, which has captured 406 million global daily users to date, most of whom are between the ages of 18 and 24. We believe that Snap and its users benefit from a network effect among its customer base and is starting to attract the attention (and dollars) of advertisers with a growth trajectory toward over $7 billion in revenue by 2027. However, there is no guarantee that Snap will effectively monetize these users consistently. In turn, we are not yet convinced about the firm’s ability to generate excess returns on capital over the next decade.