Snap (SNAP) CEO Evan Spiegel has spent around $3 billion developing Spectacles, which are the social media company’s augmented reality glasses. Indeed, he believes that they are an essential part of Snap’s future. However, despite this massive investment, Spectacles have yet to find mainstream success. Now, Snap is considering raising outside funding to help the product better compete with rivals like tech giant Meta (META), according to The Information. Interestingly, one option that is being explored is spinning off Spectacles into a separate entity, although this would be difficult since the glasses are deeply connected to the Snapchat app’s core AR features.
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At the same time, Snap is facing other challenges. In fact, executives are concerned that Gen Alpha (kids born after 2010) are using Snapchat less than previous generations, partly due to stricter phone policies at schools and lower smartphone use among younger kids. Adding to the pressure, some key executives have recently left the company. As a result, Snap’s stock has fallen sharply, from over $83 in 2021 to around $7, and recent earnings results have disappointed. This is especially notable when compared to platforms like Meta and YouTube (GOOGL), which are seeing strong double-digit ad revenue growth.
To keep creators engaged, Snap has introduced features like Snap School and ad revenue sharing, which have helped influencers earn millions. However, Snapchat’s focus on private messaging limits how much advertising it can run compared to TikTok or Instagram, which thrive on algorithmic feeds. In addition, a previous redesign that was meant to push more TikTok-style Spotlight videos was quickly abandoned after receiving backlash. Therefore, Snap is increasingly betting on Spectacles to drive its future growth, despite the glasses still being expensive, bulky, and far from widely adopted.
Is SNAP Stock a Good Buy?
Turning to Wall Street, analysts have a Hold consensus rating on SNAP stock based on four Buys, 22 Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average SNAP price target of $9.27 per share implies 29.4% upside potential.
