The price of shares of popular camera company Snap (SNAP) shot up significantly over the past month thanks to the company’s stunning second-quarter earnings and solid user-growth rate. Although the company’s substantial progress in developing its augmented reality platform should bode well for the stock, its high valuation in a competitive environment could drive profit-taking. So, let’s evaluate if the stock can maintain its momentum. Read on.Camera and social media company Snap Inc . (NYSE:SNAP), in Venice, Calif., is widely known for its Snapchat camera application that offers users a fast and fun way to share moments with friends and family. SNAP’s shares have climbed 55.7% so far this year and 17.5% over the past month, thanks to the company’s blockbuster second-quarter earnings report. SNAP has blown past estimates with solid growth in daily active users (DAUs) and revenue. And the company’s continuing investment in augmented reality platforms and expanded partnerships to strengthen its content offerings have helped it witness 23% year-over-year growth in DAUs during the quarter.
However, in a highly competitive environment, the stock’s lofty valuation remains a concern. In addition, the company has been burning cash at a time when its losses and expenses are already high. Also, since SNAP’s business is heavily dependent on DAUs, a decline in the growth rate of its user base or failure to retain existing users could negatively impact the company’s revenue-generating prospects.
Here is what we think could influence SNAP’s performance in the upcoming months: