mon
Independent Analyst, High-Risk Small-Cap & Growth Investing
Snap is seriously undervalued given how little it earns from its scale, with 971M monthly and 493M daily users and AR Lenses used 8 billion times a day. AI, AR, Specs and 400K+ AR developers sit on top, and shopping and live streaming are underdeveloped next to TikTok Shop. Specs at $2,195 are too expensive for the mass market now, but could look completely different in 5-10 years, as phones did. Users ageing out of the app is a real problem. x.com x.com
Snap's Spectacles cannot deliver meaningful commercial value within five years, making a funding partner essential to avoid years of cash burn. At best, they are a prototype, with zero chance of profitability in the next couple of years; the glasses will never sell at the scale needed to make a difference. Without a partner, Snap stock is dead money. Even so, Snap remains a good asymmetric bet on Evan Spiegel changing course, with little downside from here if he does not. x.com x.com x.com x.com
Snap's core business is priced like a cyclical commodity company, with its Specs AR glasses thrown in nearly free. Revenue grew from $4.6 billion in 2023 to $5.9 billion in 2025 and free cash flow from $35 million to $437 million, and management aims to keep the diluted share count stable from 2027. Valuing Specs at about $1 billion leaves core Snap at roughly 7.3x trailing and 5.1x 2027 EV/EBITDA. Better-than-feared Specs teasers and Meta's AR push make the setup asymmetric. x.com
Snap is undervalued, but management burning $4B+ on Specs is the biggest problem. At $2,000+ a pair, Specs are unlikely to go mass market: even 20M pairs, $40B of revenue and $10B of profit would be only a 150% ROI over 12 years, with under 1% odds of happening. Most shareholders would rather see $12-15B of revenue at 40% EBITDA margins with fewer employees and less dilution; Meta built a $1 trillion company on apps before spending on hardware. x.com x.com x.com x.com
Snap as a whole trades around a $10 billion valuation, half the $20 billion floated for a stake in its Specs AR unit, so buying the entire company effectively gets the ad business for free. x.com
Snap's Specs and AI platform are drawing heavyweight partners: Nvidia, Salesforce and Amazon teamed up with Snap for Snap Intelligence and Enterprise. Gen 1 Specs suit early business adoption, but consumer adoption hinges on comfort and style, so the next generation must shrink the frame and move hardware into a small pod off the glasses, as Meta got right. Nobody refused a Walkman or iPod because of a wire. x.com x.com
Snap is an easy pass: its new Specs AR glasses look goofy, the shiny reflective coating makes them worse, and management doesn't care because it was already paid through stock compensation and salary for creating the product. x.com
Snap should work because CEO Evan Spiegel needs access to capital to get where he wants to go, which requires shareholder alignment; the plan does not work without either. A replier adds that getting Specs to market requires a high stock price. x.com
Snap is slowly turning into a subscription software company, with Snapchat+ revenue up 87% in Q1 to $285 million, nearly 19% of total revenue versus 11% a year ago and now a $1 billion annual run rate. The price target is $14. x.com x.com
Snap's new Specs AR glasses are a horrendous product design that no one will ever wear, and no one around CEO Evan Spiegel will tell him so. @StockSavvyShay notes the reveal helps explain how Snap can be down over 90% during one of tech's best bull markets. Snap remains a lesson on hot IPOs and one of the biggest dog stocks ever. x.com x.com
Snap looks very interesting as a long-term buy at a forward P/E of 6 and a PEG of 0.21. Growth is expected near 10% for the next two years, with positive earnings expected from next year. x.com