Why Snap (SNAP) is Getting Ready to Challenge Facebook and Twitter?

RiverPark Advisors an independently-owned investment firm, recently published its first-quarter RiverPark Long/Short Opportunity Fund commentary. During the first quarter of 2020, the RiverPark Long/Short Opportunity Fund returned 9.48% (institutional shares), compared to the total return of -19.60% by the S&P 500 Index. You should check out RiverPark’s top 5 stock picks which helped them beat the market by nearly 30 percentage points. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, RiverPark Advisors highlighted a few stocks and Snap Inc (NYSE:SNAP) is one of them. Snap is a social media company. Year-to-date, SNAP stock gained 11.2% and on May 7th it had a closing price of $18.15. Its market cap is of $26.3 billion. Here is what RiverPark Advisors said:

“Snap is known for its mobile-only picture and messaging application Snapchat. Snapchat reaches 90% of 13-24-year-olds in the US and has 218 million Daily Active Users who spend about 30 minutes/day on the platform producing more than 10 billion daily video views.

We expect SNAPs average revenue per user (ARPU) to grow from its current $8 per year to more than $20 by 2023. For reference, Facebook generates a $50 ARPU and Twitter $25. Increasing users, engagement and ARPU should drive a 35% revenue CAGR through 2023, as well as expand gross margins from 56% for 4Q19 to 80%. We believe that the combination of continued strong growth in user engagement with increasing monetization will lead to a period of sustained and highly profitable growth for the company over the next several years.”

As you can see RiverPark believes SNAP has the potential to be the next Facebook Inc (NASDAQ:FB) and Twitter Inc. (NYSE:TWTR) by increased user engagement. In Q4 2019, the number of bullish hedge fund positions on SNAP stock increased by about 22% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with SNAP’s huge upside potential.

Disclosure: None. This article is originally published at Insider Monkey.