This has been a good year for Snap (NYSE:SNAP). Snap stock is up 186% in 2019, and it even reached a new 52-week high at the end of July.
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CEO Evan Spiegel been selling millions of the company’s shares. Just last week he sold over $33 million worth of SNAP stock. This seems to be a recent trend as both Facebook CEO Mark Zuckerberg and Amazon (NASDAQ:AMZN) CEO Jeff Bezos have also been selling millions of their company’s shares.
Snap has been steadily improving its fundamentals after a rough 2018. The company’s user base continues to steadily grow, which has boosted revenue and increased investor confidence.
Even still, some Wall Street analysts are hesitant when it comes to SNAP and the stock is considered a moderate buy. So is Snapchat stock worth investing in? Here are three things to consider first.
1. User Base Growth
In 2018, Snap’s user base struggled after the launch of Instagram Stories, but the company has experienced a major shift this year. During the first quarter, Snap added four million daily active users and this figure increased to 13 million during the second quarter.
The company now boasts 500 million monthly active users. This growth was largely fueled by Snap’s updated version of its app and an increased focused on AR technology.
Additionally, Snap recently announced it is partnering with Spotify to allow users to share music and podcasts directly within the app.
2. Snap Flies under Regulation Radar
This year, the news has been relatively light when it comes to SNAP. The company has avoided much of the criticism it endured in 2018 over top executives leaving the company.
Most importantly, SNAP avoided the regulatory issues that have plagued Facebook and other big tech companies.
Facebook, in particular, has dealt with a $5 billion FTC fine and criticism over its new cryptocurrency Libra.
3. Snap and Gaming
Snap’s advertising business continues to be a strong source of revenue but that company’s gaming business is where the real opportunity could lie.
Last April, the company launched Snap Games, which quickly attracted the attention of the gaming developer Zynga (NASDAQ:ZNGA).
Zynga introduced a new battle royale game exclusively on Snap’s platform called Tiny Royale. SNAP also introduced five other titles when it launched in the spring. According to Evercore ISI analyst Kevin Rippey, Snap Games could bring in hundreds of millions of dollars in sales by 2020.
The Bottom Line on Snap Stock
During its most recent earnings report, company executives seemed optimistic about SNAP’s future growth prospects. The company’s third-quarter revenue guidance has SNAP earning between $410 million and $435 million in revenue.
And this is entirely possible if the company can keep growing its user base, increase engagement on its platform, and find new sources of revenue. All in all, we can expect good things from SNAP stock in the coming years.
As of this writing, Jamie Johnson did not hold a position in any of the aforementioned stocks.
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