Snap Out Of It, This Is No Reddit

Summary:

  • I believe paying 33x this year’s EBITDA for Snap is unsustainable given its sub-20% CAGR growth.
  • Snap has already squeezed much of its operating efficiencies, leaving little room for margin expansion.
  • In contrast, Reddit’s faster growth rate and untapped potential make it a more compelling investment.
  • After Snap’s Q3 earnings, I think $10 per share will be seen as an aspirational price target.
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Investment Thesis

Snap (NYSE:SNAP) is now growing less than 20% CAGR. And it’s priced at a very high premium of approximately 33x this year’s EBITDA.

I struggle to imagine that Snap is a compelling investment at this price point. And as


Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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