One of the coolest aspects of my job is keeping tabs on all of the stock market's most important growth names. Not all of them are always worth buying, or even holding. They're all always fun to watch, though.
That said, there's one name in particular that's recently caught my eye as a new purchase prospect. That's Snapchat parent Snap (SNAP +0.23%).
Image source: Getty Images.
Yes, that Snap
Surprised? It would be a little surprising if you weren't. I know I was. This relatively small social media platform hasn't garnered much attention since the wind-down of the COVID-19 pandemic. The stock hasn't performed very well since then, either.
NYSE: SNAP
Key Data Points
There's something curious going on here, however. Despite its presumed lack of relevance, last year's revenue grew by 11%, leading to a 36% year-over-year improvement in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and dialing back 2024's net loss by 34%. Analysts are looking for comparable progress this year and next, en route to the tiniest of profits by 2028.
Connect the dots. After 14 years, the company may have finally figured out the right, sustainable business model. That's its free-to-use, ad-supported platform combined with subscription-based Snapchat+ (which now boasts 24 million users) and the monetization of small, individual content creators.
Then there's the other thing. That's the recent interest from activist investor outfit Irenic.
Although activist investors are often viewed as meddlesome and misguided -- sometimes ultimately doing more harm than good -- in this instance, the involvement also tacitly suggests there's potential with Snap that's just waiting to be unlocked. Irenic argues that Snap could be worth as much as $35 billion, well up from its current market cap of $8 billion.
Still lots of risk, but even more reward
There's still above-average risk here to be sure. It's paired with above-average upside, though. Snap is one of the few names that haven't soared since 2022's low, or even since early this month when the market began rallying again. From where I sit, the market's overestimating the risk here and underestimating Snap's potential upside.
