‘The Next Facebook’: 5 Undvervalued Internet Stocks with Huge Upside

4. Snap Inc. (NYSE: SNAP)

Number of Hedge Fund Holders: 73  

Snap Inc. (NYSE: SNAP) is a California-based camera company. It is placed fourth on our list of 10 undervalued internet stocks with huge upside. According to MangoTree, a tech-centric market expert, the company can still expect to drive advertising revenue from innovations within the platform that other social media firms have already maximized. The user growth of the company has also shown no signs of slowing down, the expert contends, noting that the stock has been undervalued in analyst ratings in the reopening plays. 

On July 23, investment advisory Jefferies maintained a Buy rating on Snap Inc. (NYSE: SNAP) stock and raised the price target to $90 from $81, noting that the guidance for the firm appeared conservative given year-over-year growth in quarterly revenues. 

Out of the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in Snap Inc. (NYSE: SNAP) with 24 million shares worth more than $1.2 billion. 

In its Q2 2021 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Snap Inc. (NYSE: SNAP) was one of them. Here is what the fund said:

“Snap shares were a top contributor for the quarter as well, also driven by strong first quarter results. The company reported accelerating revenue growth of 66% for the period (up from 62% fourth quarter growth), driven by user growth of 22%, and a 36% expansion in average revenue per user (ARPU). The company also guided to stronger-than-expected and accelerating 81%-85% revenue growth for second quarter 2021. Adjusted EBITDA improved by $79 million year over year for a break-even margin, up 1,800 basis points, and free cash flow improved dramatically, turning positive for the period to $126 million. Snap also continued to roll-out products that should help drive further expansion in user growth and ARPU, including Spotlight, a TikTok-like experience, with more than 125 million Snapchatters using it during March, and original programming starring Ryan Reynolds.

With TTM of $2.8 billion in revenue and an ARPU that is about 1/2 that of Twitter and 1/3 that of Facebook, we believe Snap has a long runway for both revenue growth and expanded profitability as it improves its platform functionality, grows its audience, and continues to advance its monetization.”