Should Cloud Outages at AWS Prompt a Rethink of Snap's (SNAP) Infrastructure Risk Strategy?

• Earlier this week, a widespread Amazon Web Services outage temporarily disrupted Snapchat and many other major platforms, leaving millions of users unable to access services for several hours due to issues originating in AWS's US-EAST-1 region.
• This incident highlighted the operational risks for companies like Snap that rely heavily on a single cloud service provider for critical infrastructure.
• We'll examine how service disruptions linked to cloud infrastructure reliability affect Snap's longer-term business outlook and risk profile.

Find companies with promising cash flow potential yet trading below their fair value.

Snap Investment Narrative Recap

To own Snap shares, you have to believe that its investments in AR innovation, mobile engagement, and digital ad expansion will ultimately outweigh fierce competition, persistent unprofitability, and reliance on advertising. The recent AWS outage underscores Snap’s operational dependence on third-party cloud infrastructure, but, based on current information, this disruption does not appear material to short-term growth catalysts or near-term risks; Snap’s biggest challenges remain user growth and profitability rather than cloud reliability.

Of the recent company updates, Snap’s study with Samba TV demonstrating significant lifts in ticket sales and viewership from Snapchat ads stands out. This directly ties to Snap’s growth catalysts, highlighting how it leverages platform innovation and its young, engaged audience to attract advertisers and expand monetization, even amid a volatile digital ad environment.

By contrast, investors should be aware that a single cloud provider outage is only one example of Snap’s broader exposure to operational and revenue risks...

Read the full narrative on Snap (it's free!)

Snap's outlook anticipates $7.5 billion in revenue and $827.3 million in earnings by 2028. This scenario assumes annual revenue growth of 10.0%, and an earnings increase of $1,373.6 million from current earnings of -$546.3 million.

Uncover how Snap's forecasts yield a $9.28 fair value, a 18% upside to its current price.

Exploring Other Perspectives

Fifteen fair value estimates from the Simply Wall St Community range from US$8.23 to US$18.95 per share. While many see opportunity, intensifying competition and Snap's heavy reliance on ad revenue remain big factors driving these divergent outlooks.

Explore 15 other fair value estimates on Snap - why the stock might be worth just $8.23!

Build Your Own Snap Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Snap research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.
• Our free Snap research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Snap's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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