I like Snap (SNAP -1.29%) and I think it has a bright future. However -- like many young companies -- it sometimes fails to execute at the level that its investors might want.

Such was the case with its most recent earnings report. It was the embodiment of a mixed bag. Some results were impressive; others were not. With the stock within a whisper of its 52-week low, investors want to know: Is now the time to buy? Here are two reasons to buy and one reason to wait.

Man holding a phone and laughing.

Image source: Getty Images.

First reason to buy: Its key metrics still look good

Snap indeed missed expectations for sales and earnings, but the scale of these misses is important to understand. First-quarter revenue was $1.06 billion versus expectations of $1.07 billion, and it lost $0.02 per share instead of generating $0.01 per share -- far from a disaster.

All the same, its user metrics look solid. Daily average users climbed to 332 million, up 18% year over year. The average revenue per user jumped to $3.20, a 17% jump from a year ago. The key takeaway? Snap is still growing its user base and ad revenue at a double-digit pace.

Snap's Key User Metrics
Metric Q1 2022 Q1 2021 Difference YOY Growth
Daily average users 332 million 280 million 52 million 18.6%
Average revenue per user $3.20 $2.74 $0.46 16.8%

Data source: Snap Inc. Earnings Release. YOY = year over year. 

Second reason to buy: Snap's user base remains highly desirable to advertisers

As I've pointed out before, Snap has a tremendous reach among young people. In the U.S., U.K., Australia, France, and the Netherlands, Snap reports that 90% of 13 to 24-year-olds (collectively, Gen Z) are monthly Snapchat users. That's an astonishing figure. Nevertheless, Snap has less than a 1% share of the $520 billion global digital ad market -- leaving plenty of room for the company to grab additional market share (and ad revenue) in future years.

On the revenue front, it looks like the company is starting to deliver. In the first quarter, Snap announced that upfront advertising commitments for 2022 have already exceeded last year's commitments by over 60% -- a sure sign that advertisers like the return on investment they see with Snap ads.

Statistic: Number of Gen Z users in the United States on selected social media platforms from 2020 to 2025 (in millions) | Statista

One reason to hesitate: Macroeconomic headwinds and reinvigorated competition

When you consider the overall economy, things look rough:

  • Inflation is at record levels.
  • The economy contracted in the first quarter.
  • The Federal Reserve is hiking interest rates.

None of this is good for growth stocks like Snap. What's more, a couple of the company's chief competitors seem to be finding their mojo. Meta Platforms just reported solid earnings results. Elon Musk just bought Twitter and will take the company private. To say that Musk, the founder of Tesla, has a history of success would be an understatement. His entry into the social media battlefield has to be seen as a formidable challenge to the other companies in the field.