Arete Cites Higher-Margin Recurring Revenue as Catalyst for Snap Inc. (SNAP)

Snap Inc. (NYSE:SNAP) is among the 8 Most Promising Metaverse Stocks to Buy According to Hedge Funds.

Snap Inc. (NYSE:SNAP) is one of the most promising stocks. 

TheFly reported on February 9 that Arete Research upgraded SNAP to Buy from Neutral and set a price target of $7.30. In support of the update, the firm pointed to a shifting revenue mix and pointed out that SNAP is shifting its focus from its smaller-scale advertising business to higher-margin, recurring subscription revenue. Analysts predict that this change will improve the company's financial standing over time. The company's more positive outlook on the stock is supported by its perception that downside risk is minimal at present share levels.

More recently, it was reported on February 11 that Texas Attorney General Ken Paxton sued Snap Inc. (NYSE:SNAP) and claimed that the business had not warned users and parents enough about the app's addictive features and hazardous content. The complaint alleges that, in spite of its kid-safe marketing and "12+" rating in app stores, Snapchat ended up exposing kids to mature content like profanity, sexual material, and posts about drugs.

The complaint also highlights features such as "Snapstreaks" and argues that daily-use incentives incite compulsive behavior among teens. Paxton accused the corporation of deceiving customers and stated that parents should be made aware of the dangers posed by the apps their kids use. The action comes after the Texas Attorney General filed similar allegations against Roblox (NYSE: RBLX) and TikTok, two other significant social media companies.

Snap Inc. (NYSE:SNAP) is an American tech company best known for Snapchat that is shaping the augmented reality (AR) metaverse by enabling digital overlays on the real world. It leads in AR lenses and tools, supports millions of creators, and is developing wearable AR “Specs” glasses to blend digital experiences with physical spaces.

While we acknowledge the potential of SNAP as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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