Known best for its Snapchat app, (NYSE: SNAP) is a company that's failed to consistently produce a profit and the stock price is down nearly 90% from its all-time high. Could there actually be a case for buying shares of a business like this?
Before dismissing it, investors should consider the things in Snap's favor. In my opinion, the company's strengths start with its impressive user base. Its app now has more than 430 million people who use it every single day and over 850 million that use it at least once a month, as of the second quarter of 2024. And over 80% of users are adults, which is attractive from an advertiser's perspective.
Indeed, apart from a small but growing subscription revenue stream, Snap primarily generates revenue from advertising. And here the trends are promising. Much of Snap's advertising revenue comes from direct-response ads -- ads that produce an immediate response from consumers. In Q2, direct-response advertisers more than doubled compared to the same quarter of 2023. In other words, advertisers are flocking to Snapchat to market their products to its impressive user base.
Source Fool.com