Roblox Corporation

Company: Roblox Corporation
Ticker: [NYSE: RBLX]
Sector: Gaming / Creator Economy

Key Narrative: Roblox is ultimately more than just simply another video game, it is a place where users create experiences not just merely play. Roblox is essentially Gen Z's digital playground, a place for socializing, gaming, identity, and even making money. Roblox is unique because it is a game made by the players meaning that while you are playing Roblox you can not only consume but also create. This makes the game have a community built energy that is unseen anywhere else. The company is also innovating with AI tools that make building games easier which could bring a whole new wave of creators and thus players. However there is a little bit of an identity crisis at Roblox, is it merely a kids game or something Gen Z will grow with long term. The bet would be on whether Roblox could escape the label of a kids game and grow into something that is more, a place where digital identity, social interaction, and money all move through user created content.

Roblox is one of the most important platforms for Gen Z, and it is built almost entirely by the people who use it. The games, the items, the experiences — it is all user generated. That gives Roblox a kind of chaotic creativity that feels more like an online economy than a traditional game. What makes it stand out is that people do not just show up to play, they show up to build. With new AI tools making it easier to create, Roblox is pushing even deeper into its identity as a platform, not just a product. The company is trying to position itself as the place where the next generation of digital creators get started. That long term vision is why Roblox fits into the speculative growth category. It is not a safe bet, but if it works, it could be one of the most important digital platforms of the next decade.

At the same time, the risks are obvious. Roblox still is not profitable on a GAAP basis, and it is burning through money even while its bookings are growing. The platform leans heavily on a younger audience, which brings more scrutiny around regulation, safety, and data. There is also the branding problem, a lot of people still see Roblox as a kids game, which makes it harder to grow with its audience or attract advertisers and older users. The company is banking on AI and creator monetization to change that, but it is still early. So while the potential is real, this is clearly a high risk stock. You are betting that Roblox can take its cultural relevance and actually turn it into a scalable business without losing what made it work in the first place.

Roblox is not necessarily trying to market to Gen Z but rather it is Gen Z. The platform does not rely on flashy ad campaigns or influencers to get attention. The content is user made not corporate made, giving the platform and its ecosystem an authentic and community based feel. This ecosystem makes Roblox feel more organic than platforms trying to market or buy their way into relevance. User interaction is also deep. When people are using Roblox they are not engaged in something passive like scrolling but rather full fledged participation. Roblox's brand is not inflated by marketing hype because after all the users are the ones doing the building. The real question lies in whether the company can remain embedded as Gen Z grows up, because currently it definitely is.

Roblox does not position itself as some mission driven company, and it definitely is not trying to win people over with fake sustainability claims. There is no greenwashing here because they are not even pretending to be that kind of brand. But that also means they are not really doing much to lead with the values Gen Z tends to care about. The biggest ethical conversation around Roblox has nothing to do with the environment and everything to do with how it handles its users, especially the younger ones. A lot of people on the platform are under 18, and that comes with real responsibility around data, content, safety, and money. The company has had criticism in the past for how hard it is for young developers to actually get paid fairly, and how unclear the economics of Robux can be. There have been some updates to improve safety and offer better education around monetization, but it still feels like the platform is figuring things out as it goes. Roblox is not actively misleading anyone, but it also is not doing much to stay ahead of what Gen Z expects when it comes to ethics. It is not trying to fake purpose, but it is also not setting the standard. Right now it feels like a company trying to grow fast and deal with the consequences later, and that works for a while, but Gen Z notices when a company is out of sync with the values it claims to care about.

So is Roblox's demand real or artificial? Is everybody playing it because it is really fun, or because they think they are supposed to? Roblox is as close to real demand as it is possible to get. There is no influencer marketing, no celebrity partnerships, and little to no traditional marketing of any sort. People discover it through friends, YouTube, or just running across some bizarre game that draws them in. The viral games go viral because they are actually fun or interesting, not because a brand paid to make them so. Roblox is also one of the few places where the community is the one making everything — the games, the add-ons, the experiences — so it is not top down curated. It comes from within the community. And it is not all people scrolling, they are creating and adding to it, so the engagement is much deeper. Roblox is completely user generative, and the demand is real because the culture is not artificial, it is produced.

Roblox's revenue is a mixed bag. Currently Roblox's revenue is growing with the company's total user spending up 51 percent year over year in Q2 which is a big acceleration compared to prior quarters. Their growth is backed by real engagement. Daily active users grew 41 percent and total hours on the platform rose 58 percent. This is not a fluke from price increases or a viral trend, it is actual steady platform wide growth. Most of this user growth is coming from Gen Alpha or international expansion so it is not yet saturated. On top of this AI tools could unlock even more, making games easier to create and getting more creators and therefore players. While all this seems great it is still a mixed bag for a reason, and that reason is that long term growth is still very much tied to the attention on Roblox, and when that drops Roblox drops. So while right now growth does look strong and user driven, it is still too early to say how long that momentum can last.

In terms of margins and profitability Roblox is not doing great. Roblox is still not a profitable company on a GAAP basis with the company losing around 279 million dollars in Q2 of 2025. However it did report a positive free cash flow of 177 million and a positive adjusted EBITDA which shows that efficiency is improving a little. Its gross margins also are not great at 18 percent which is mainly due to high infrastructure costs: servers, moderation, and developer payouts make it harder for Roblox to scale its margins without making the user experience worse. Another issue is that its core revenue model is tied to the in game virtual currency that can fluctuate a lot. Roblox is also spending a lot right now on AI safety, a good investment in the long term but something that looks painful in the short term. Ultimately the bottom line is that Roblox has a high potential business model that has not really matured yet, and its margins are still a work in progress.

In terms of balance sheet strength Roblox is pretty strong. It is sitting on 4.74 billion in cash, short term investments, and long term investments as of Q2 2025 which gives it a serious financial cushion and breathing room. The company's net liquidity is also good at 3.73 billion showing that it is not handcuffed by loans or over leveraged somewhere. Roblox is free cash flow positive pulling in 177 million in the quarter which is a strong number and shows financial flexibility. Compared to others in its lane Roblox is definitely not burning through cash hoping that investors remain optimistic, instead it is building a financial platform that could weather slower quarters if needed. So in short Roblox is not just growth driven, it is growth backed meaning there is real cash strength.

Metric Roblox (RBLX) Electronic Arts (EA) Unity Technologies (U)

Revenue Growth (YoY) 21.00% 2.40% –2%

Gross Margin ~78% ~79% ~74%

Price to Sales Ratio ~21.2× ~5.6× ~7.5×

Roblox grew revenue 21 percent year over year. Unity fell around 2 percent and EA hit 2.4 percent. That margin matters. Roblox is not growing off the success of one hit or one flash in the pan. Growth is because of regular use of Gen Alpha users, users abroad, and developers earning them money. It is real platform use, not hype. The problem however is how sustained it remains. When creators back off or users begin going away, growth turns off fast. Margins are reasonable but consistent across the board. Roblox's gross margin is 78 percent, EA's slightly higher at 79 percent, and Unity's around 75 percent. The aspect of Roblox's margin that is interesting is that it achieves this without having invested heavily in in house studios or content. The users themselves make the games and experiences. That keeps margins consistent and keeps Roblox free to keep its funds invested in AI tools, new infrastructures, or security without going into the core business. It is an agile setup and that assists it while the firm sorts ways to achieve scale and convert it into real financial success. Roblox is 21 times sales. That is multiples higher than 7.5 times for Unity or 5.6 times for EA. Investors clearly consider it something more than a game operator. That is understandable but expectations are already baked into the price. If Roblox keeps growing and finds real ways to make money without hurting the thing driving it, the premium can be justified. Anything less and it is overvalued like every game operator.

There are a bunch of industry tailwinds that Roblox is benefiting from right now. First and probably the biggest is the long term shift of younger generations spending more and more time in digital spaces instead of traditional entertainment like TV or movies. Another big trend is the rise of user generated content and platforms that let users not just consume but actually build. That is something Roblox is built for. Roblox is also benefitting from the growth of mobile gaming and casual gaming, where people want to jump in and play something fast instead of buying a console or downloading a huge game. Lastly, with AI becoming more integrated into tools and platforms, Roblox is ahead of the curve by already starting to roll out AI creation tools that make it easier for users to build their own games. These are all major trends that could keep pushing Roblox forward over the next few years.

There are also tons of moats and differentiations that Roblox has that makes it hard for other companies to copy what they are doing. One of the biggest ones is that all of the content is created by users which makes it super hard to replicate because you cannot just go out and buy that kind of community. Another moat is how many people are active on Roblox, because once people have their avatar, their Robux, and their favorite games, it is really hard to leave and start over somewhere else. Roblox also has its own in game economy that keeps people building and spending which adds another layer of stickiness. On top of all that, the platform has years of experience with moderation, creator tools, and monetization systems that new competitors would have to build from scratch. When you put it all together, it is not just the platform that makes Roblox hard to compete with, it is their ecosystem.

As of August 8, Roblox (NYSE: RBLX) trades around $46 a share, putting its market cap at roughly $29 billion. That is a steep ~21× price to sales ratio, far higher than gaming peers like EA or Unity. The label is not without some substance though. Q2 revenue grew 21 percent year over year, gross margins sit at 78 percent, and the company posted positive free cash flow of 177 million dollars. Growth is coming from rising daily active users, up 41 percent, and total hours engaged, up 58 percent, with AI creation tools expected to widen the creator base. That all aside, Roblox is still running a 279 million dollar net loss, margins remain tight compared to its valuation, and the business is heavily dependent on keeping younger users engaged. The valuation reflects belief that Roblox is more than a game company and can mature into a broader digital platform. While that future is not guaranteed, the fundamentals are showing enough momentum to keep the story alive for now.

Roblox is still one of the biggest names in user generated gaming, but it has not proven it can turn that cultural relevance into consistent profit. In Q2 2025 revenue grew 21 percent year over year, gross margins were 78 percent, and free cash flow was 177 million dollars. Even with those numbers, the company still lost 279 million on a net basis. Most of its revenue still comes from the in game currency system, which can be unpredictable, and ads and AI creation tools are both still too early to count on as major revenue drivers. At around 21 times price to sales, Roblox trades at a huge premium to EA and Unity without having the same profitability or business maturity. The bet is that Roblox becomes more than just a game platform, but until it shows steady earnings and a more balanced mix of revenue, it looks more like a risky momentum stock than something to hold for the long term.

For me Roblox does not really fit into a disciplined long term portfolio right now. The platform is growing fast and engagement is high, but the business still is not profitable and most of the revenue is tied to its in game currency, which can be unpredictable. Ads are still being tested and AI tools sound promising, but neither is proven as a big money maker yet. On top of that the stock trades at about 21 times sales, which is way higher than EA or Unity without the same level of profitability to back it up. The potential is there if Roblox can expand how it makes money and keep users engaged as they get older, but that is a lot of execution risk. For now it feels more like something to watch than something to hold as a core position.

If you do believe in Roblox as a long term play, some good levels to watch are around 123 to 125 dollars with tight stops just below 122 as this area has acted as recent support and gives a decent risk reward setup. Another possible entry would be if it pulled back into the 120 to 122 range for more cushion before buying. On the upside, if Roblox breaks cleanly above 134, that could be a breakout entry with room toward 138 to 140. A near term catalyst to keep an eye on will be the Q3 2025 earnings report expected in late October or early November, where updates on ads, AI tools, and user growth could drive the next move.

Reddit Inc.

Company: Reddit, Inc.
Ticker: [NYSE: RDDT]
Sector: Social Media / Digital Communities Key Narrative: Reddit, Inc. is definitely a cultural cornerstone for Gen-Z, and it is a place that is almost completely decentralized and authentic. Its many subreddits shape real-world narratives like meme stocks, political sentiment, and product reviews. The company is also very unique, with it being user-moderated and long-form discussion based. However, the company does have issues. The company struggles to grow without receiving backlash from core users, risking the platform's core identity. However, recent moves like API pricing changes and its AI data licensing can turn out to be lucrative. Ultimately, Reddit is trying to find the balance between its internet forum soul and shareholder expectations, and their ability to do so will be the catalyst for whether the company becomes a cult platform or a true tech business.

Reddit's investment case is a kind of speculative growth, so a mid-risk growth stock. This is mainly due to a few factors. Firstly, the company is still early in monetization stages compared to some of its peers like Meta, Snap, and Pinterest. Secondly, the revenue growth of the company is driven more by licensing than traditional ad expansion. And while the Gen-Z adoption of the platform is strong, the growth of their numbers on the platform is not exponential like other platforms, meaning that it has to convert its loyal and deep user engagement into sustainable monetization without the safety net of user growth that other platforms have. So ultimately, the bet you are making when you invest in Reddit long term is that it will be able to convert its cultural capital into economic capital.

The risk level of this stock is moderate to high, with its prior monetization attempts clashing with its users, no history of consistent profitability, or monetization innovation. The company's user base also is not ideal, with a user base that skews towards young and niche, which is not ideal for broad advertising appeal. Ultimately, Reddit’s future is completely full of friction with its users, advertisers, and itself, making this a high-risk play.

Reddit is a place where Gen-Z researches their future, whether it be future jobs or future universities. The company also feels private yet public with its anonymous usernames, meaning that people can be honest without having to remember their own personal brand. There is also no paid celebrity presence, meaning that its user base and popularity is not engineered but rather earned. The platform is also old by Gen-Z standards, yet it has clearly stayed very relevant, and longevity equals legitimacy. Ultimately, Reddit is not hype, not trendy, but rather a platform that is embedded in Gen-Z routines.

Reddit does align with some of Gen-Z's values while not aligning with others. Firstly, the company aligns with a lot of Gen-Z's anti-institution values with its decentralized knowledge sharing. Reddit is also home to many activism subreddits, making the platform both politically diverse and issue-aware. Transparency is also baked into the UX, with there being upvotes and downvotes on everything, meaning that the content is ranked democratically, not by some opaque algorithms. However, all those good things being said, the company has faced backlash for monetizing API access and selling user content without user control in its AI licensing deals. Also, the company does not do a great job of content moderation, meaning that a lot of hate speech is allowed. It seems that while Reddit does align with a lot of Gen-Z values, its pivot to try and create profit makes the company risk losing that alignment.

So is Reddit's demand manufactured or real? Are people using the product because it is great or because of FOMO? Well, Reddit could not be farther from manufactured demand. There is no celebrity marketing and no brand collabs. Reddit is almost anti-hype by design. Reddit's many subreddits also all form naturally on shared obsessions rather than trend cycles. And posts go viral because of authenticity, not paid reach like other social media. Engagement on Reddit is also utility-driven. People go to Reddit looking for answers, not just to waste time. And Reddit also bleeds onto other platforms like TikTok and Instagram, meaning that Reddit is a source, not a layer. Demand for Reddit is very organic and user-led and is one of the few platforms that has not been gamified or commodified.

Reddit's revenue growth has increased over the past few years, with 1.3 billion in revenue in 2024, up 62 percent from the prior year, and Q4 alone saw revenue 71 percent YoY to 427.7 million, showing growth is accelerating. Its revenue mainly comes through advertising, with the company making 394.5 million in Q4, while the other methods for revenue like licensing reached 33.2 million. And while licensing may be new, it is already contributing majorly, and this is good because Reddit is diversifying its revenue beyond merely ads. Reddit's daily unique users also grew, with the company reaching 101.7 million users in Q4 2024 and 108.1 million in Q1 2025. While user growth does remain strong and global, it is becoming increasingly mature, meaning that the company’s future gains will rely on more monetization per user. And the numbers show that Reddit has started focusing on that, with the company’s revenue per daily active user increasing 18 percent from Q3 to Q4 of 2024. This suggests that the company has started to extract more value from its base, not just banking on new users. Reddit's top line is ultimately real and accelerating, but the story has started to shift, with growth being about extracting more value from users.

Reddit's margins are typical of a software company, with the company having a gross margin of 92.6 percent in Q4 of 2024 and a full-year gross margin of 90.5 percent. This displays that the company’s core business model is still high margin and scalable, which is a strong advantage for the company. Reddit also has a strong cash flow of 89 million and an adjusted EBITDA margin of 36 percent in Q4, displaying that the company has enough cash flow to reinvest or reduce burn while still building. However, on the flip side, its profitability is not great, but it is improving. Even though Reddit took a 484 million dollar net loss in 2024, Reddit was profitable towards the end with a Q4 net income of 71 million and a Q3 net income of 29.8 million. Even though Reddit has not had a great history of profitability, Reddit is clearly on the right path, with its earnings improving. Ultimately, even if the profitability is lacking, it is improving and is slowly looking to become a lean cash-generating machine with high margins.

Post-IPO and operational cash flow have left Reddit with 1.7 billion in cash and equivalents as of Q3 2024. This is great because it allows Reddit to fund its expansion and invest in much-needed ad tech without needing fundraisers. The company also has zero long-term debt, which keeps leverage low and means they have no material interest burden, which is good because it means the company’s management can focus on growth and margins without debt pressure. Even with these big strong points, there is the issue of stock-based compensation, which is a serious expense at 23 percent of revenue. This is a big issue because it could wear on near-term earnings and GAAP (Generally Accepted Accounting Principles) results. Ultimately, Reddit's balance sheet is a robust one that is low risk, well-capitalized, and flexible. Its main focus should now be converting this strength into good investments.

Metric Reddit (Q1 2025) Snap (Q1 2025) Pinterest (Q1 2025)

Revenue Growth (YoY) 48% 21% 23%

Gross Margin 88% 53% ~80%

Price-to-Sales Ratio ~8.7× ~4.9× ~6.1×

With 48 percent YoY revenue growth, Reddit is growing almost twice as quickly as Snap or Pinterest. That acceleration is not fueled by bundling or short-term virality, but by increasing engagement, improved ad tools, and high-margin AI licensing agreements. This type of organic growth indicates genuine user and advertiser momentum, though the big question is if it lasts after licensing settles out. Reddit's 88 percent gross margin is more similar to software peers than social media peers. This reflects its efficient infrastructure and high-margin revenue from data licensing to AI companies. That margin profile gives Reddit strategic optionality. It can reinvest for growth, weather downturns, or withstand margin pressure as it scales. It is a sturdy buffer most competitors just do not have. At a price-to-sales multiple of approximately 8.7×, Reddit is trading at a premium to Snap and Pinterest. But not without justification. Reddit is already toying with profitability, boasts a distinctive cultural footprint, and is developing several monetization levers. So while not cheap, Reddit has arguably earned its valuation, and if execution persists, the multiple may even prove to be conservative.

Reddit is riding a few small tailwinds. Firstly, the demand for authentic, interest-based communities. Secondly, the growing AI training data demand, and the small shift away from the heavy algorithm-based social media. And as Gen-Z gets tired of algorithmic virality, Reddit's topic-based format feels like a breath of fresh air, especially popular communities like r/AskMen, r/Nursing, r/MakeupAddiction, and r/AmItheAsshole. Ultimately, Reddit's model may increase due to the desire of younger users to prioritize community and authenticity over feeds and filters.

Reddit's moat is not the tech but rather the communities that have formed. Reddit has 15 years of content depth with millions of conversations occurring, so even if a competitor cloned the tech, they could not clone the history. This history also provides another moat: its data licensing, because it is foundational to AI. Another moat is the fact that since there are so many formed communities, there are also many free volunteer moderators of those communities, therefore creating free governance, which makes the company more scalable than anybody that clones it. And these communities that have formed themselves are the biggest moats, where millions have joined to discuss their problems, share memes, or just discuss shared topics of interest.

Reddit's brand stickiness lies in its utility, not merely its vibe. From acne tips to advice for coding errors, Reddit is used as the cheat sheet for life for Gen-Z, which means Reddit for many is habit. Users also do not go to Reddit to get likes or gain followers but rather to read, learn, and connect, meaning that Reddit is not trend sensitive like BeReal. Gen-Z also values mental health and real talk, and Reddit’s pseudonymity creates psychological safety, which builds trust and loyalty. Reddit posts also leak everywhere, showing that Reddit is not merely a participant but a source layer of social media. Reddit's challenge definitely is not user retention but rather monetizing that loyalty without harming the user experience.

As of July 11, the stocks of Reddit (NASDAQ: RDDT) are at 146.75 dollars, which values it at about 19 billion dollars. That is a rich ~8.7× price-to-sales ratio, several times Snap or Pinterest’s. All label behind all substance, though. Q1 revenue growth was 48 percent YoY, 88 percent gross margins, and adjusted EBITDA recently breached the break-even mark. Growth has not been coming through ad revenue here, though, but through the higher-margin AI licensing contracts, such as a multi-year, multi 60 million dollar Google deal. That all aside, the ad stack remains juvenile, self-serve abilities are weak, and data licensing cannot scale infinitely. The valuation reflects belief that Reddit can monetize its unique cultural footprint, and while that future is not guaranteed, the fundamentals are catching up to the story.

Reddit is becoming a breakout breed of the social media cosmos, a culturally central platform that finally demonstrates inherent business maturing. With Q1 2025 revenue 61 percent higher year over year, 90.5 percent gross margins, and net and EBITDA positive, Reddit has emerged past the hype phase and into actual operational momentum. Monetization is still in early innings as ad infrastructure continues to remain underbuilt, and AI or data licensing, now roughly 10 percent of revenue, may be spotty or ride one-time deals. Yet the multi-revenue stream nature of the business generates attractive upside potential if executed properly. On a roughly 8.7 times price-to-sales ratio, Reddit is not cheap, yet it is not priced for perfection either. For investors buying into the thesis of Reddit as the front page of the internet and the ability to translate cultural relevance into scalable and profitable product, this becomes a high-upside long-term growth play with a bit of speculation risk as part of the bargain.

Reddit in my opinion best fits into a disciplined investment strategy as a speculative satellite position. There is a high upside, but there is definitely risk. You should keep your positioning small and intentional. You should also watch their execution, so look for progress in ad tools, AI licensing consistency, and sustained user growth. Its current price-to-sales ratio already reflects a bit of optimism. This is clearly not a value play but a growth conviction bet. Also be sure to reassess quarterly, especially if the story changes. Do not just hold if you like the product.

Some good places to enter would be to buy near 140 to 142 dollars with tight stops just below 138. This range aligns with recent support and offers a favorable risk to reward setup. Another good entry would be to wait for a pullback into the 136 to 138 dollar band for more buffer before entering. However, if Reddit breaks decisively above 147, that could trigger a breakout entry with upside toward 151 to 155 dollars, so it would be good to buy then as well. A good catalyst in the future would be the Q2 2025 earnings call on July 31st 2025 after market close.

Spotify Technology S.A.

Company: Spotify Technology S.A.
Ticker: NYSE: SPOT
Sector: Streaming & Digital Media
Key narrative: Spotify is ultimately more than simply a music platform for Gen-Z—it’s a cultural utility. Whether one is sharing their Spotify Wrapped, discovering new recommended songs or simply listening to playlists, Spotify has embedded itself in not only our generation’s lifestyle but other generations' lifestyles as well. However, with TikTok changing the way music spreads and with artists and creators questioning payments, the question is: Can Spotify keep its rhythm?

Spotify is definitely a growth investment case for a few different reasons. Firstly, it has massive global user growth with the company expanding in areas like Latin America, Africa, and Southeast Asia. Secondly, the company has new AI personalization with smart playlists and even your very own personal DJ. Thirdly, because of its expansion into other forms of content like podcasts and audiobooks. And lastly, because the company has a high brand loyalty among its users.

The risk level of this stock is moderate and that is due to a few main factors. The first reason is that the company is facing increasing costs from licensing and content from labels. Another weak point is the company’s monetization of free users, which it has struggled to do. Thirdly, in this sector, there is a lot of competition with Apple Music, YouTube Music, and other streaming and digital media companies.

Spotify is one of the very few tech companies that feels completely native to Gen-Z. However, the company isn’t just a vibes-driven growth company anymore—it’s really making moves, raising prices, tightening its costs, and staying ahead of the curve by experimenting with new content like audiobooks and AI. So is this a disciplined investment? That depends on whether Spotify can turn this cultural fixation into long-term margin.

Spotify is completely and utterly embedded in Gen-Z's lifestyle. I personally can hardly name anybody I know that doesn’t interact with the company in some way. And this sort of adoption is due to a few reasons. Firstly, because of how much Gen-Z uses the app across studying, commuting, relaxing, and even socializing. Secondly, because the company feels native—not forced—mainly due to its personalization and minimalist design. It's also culturally significant, with Spotify Wrapped being a huge social media moment every year with everyone sharing their Wrapped. And lastly, because the company is free, thus enticing users that later upgrade.

Spotify also aligns with Gen-Z's value of sustainability with its various projects centered toward that value. One of its most major projects is its promise to achieve net-zero greenhouse gas emissions by 2030, showing how it cares about sustainability, along with its renewable-energy-only powered offices. The company is also very transparent, showing its carbon emissions every year. It also does various other things to promote sustainability like its Climate Action Hub and its internal Climate Champions Network.

Spotify’s demand is anything but manufactured. The product itself is used widely by people not because it was recommended by an influencer but because it's widely regarded as the best product available. It is also very culturally significant, with many people having Spotify baked into their routines and daily life—and this itself creates demand by people merely recommending it to each other. Also, the product has frictionless adoption, with there being a free version of the app which makes it accessible to all. Ultimately, Spotify’s demand is very real and it is rooted in quality, cultural relevance, and daily utility—not pressure.

Spotify’s current growth rate is definitely real and sustainable and this is shown by a few things. Firstly, in the past, Spotify’s revenue growth has been good with 18 percent revenue growth in 2024 to $15.6 billion and Q1 revenue up 15% YoY. What’s really impressive, however, is how 80% of this revenue is not from new users but from their premium subscriptions, which is a sustainable and safe revenue source. This is very important because it shows that Spotify is not only adding users but knows how to earn from them. Their ad revenue also impressively increased, showing Spotify can succeed even in a volatile ad market. Spotify’s growth is clearly organically sticky, meaning that it's not merely boosted by short-term promos or advertising campaigns. There are also new monetization vectors for Spotify like audiobooks, AI tools, and tiered subscriptions that can turn out quite successful.

Spotify is no longer the growth-at-all-costs company it used to be and has now become a cash-generating machine. Firstly, its gross margins have increased to 30–32%, meaning that it's keeping more of each euro earned than before (25%). Secondly, the company also has become profitable—in 2024, its first year of profitability, the company made $1.14 billion, showing that Spotify can operate well and not merely rely on growth. This profitability is not a fluke either, and this is shown by their continued profit in Q1 of 2025 where they made $225 million—and this is important because it reduces their dependence on fundraising and boosts investor confidence. More specifically, its FCF (free cash flow) was $2.3 billion in 2024 and is only increasing. This is a sign of long-term viability because Spotify can fund its future. Spotify is also smart with its cuts, stopping the throwing of money at flashy content like some of the podcasting deals for example. Instead, the company has focused on maximum return on content investment. Lastly, Spotify’s new features, automation, and personalization tools reduce the need for manual curation, which improves scalability.

Spotify’s balance sheet is very strong at the moment due to a multitude of reasons. Firstly, it has $7 billion in cash and short-term investments, meaning that it can power innovation, mergers and acquisitions, or weather a downturn without any fundraising. And while the company does have a debt of $2 billion, it does have a net cash position of around $4 billion, meaning that the company is ultimately more than financially healthy. Its debt-to-equity ratio is also remarkably good at around 0.3–0.4, meaning the company isn’t over-leveraged and dependent on debt to look good. Spotify’s current ratio being less than one shows that the company can meet its short-term obligations, which also signifies financial health. Ultimately, Spotify doesn’t need market optimism to survive—it has the cash to weather almost anything that is thrown at them.

Metric Spotify (Q1 2025) Apple Services (Q2 FY2025) Amazon Music (FY 2024)

Revenue Growth (YoY) 15% 12% 16%

Gross Margin 31.60% ~75.7% Not disclosed

Price-to-Sales Ratio ~9.2× ~7.3× ~4×

These metrics display a few key things. First, they show that Spotify is one of the fastest-growing players in the audio space, with revenue growth slightly outpacing Apple Services and closely rivaling Amazon Music. But unlike Amazon, where music is just a bundled perk, Spotify’s growth is standalone and earned—not subsidized. When it comes to margins, Spotify has made huge progress, with a 31.6% gross margin that, while lower than Apple’s elite ~75%, represents a major turnaround from its earlier “growth-at-all-costs” model. It’s proof the business is not just growing—it’s maturing. Then there’s valuation: Spotify’s ~9.2× price-to-sales ratio may seem steep, but when you factor in its accelerating profitability, strong cash flow, and unique position as the only pure-play global audio platform, it starts to make more sense. Apple’s lower P/S ratio reflects its maturity and lower risk, while Amazon’s shows that Wall Street doesn’t really view Amazon Music as a serious business yet. In contrast, Spotify has earned its premium by doing what few streaming companies have pulled off: scaling globally, turning a profit, and maintaining growth without a hardware or Prime bundle to lean on.

There are a bunch of industry tailwinds that this company is benefiting from. Firstly, and most importantly, the company is benefiting from the longtime trend that continues accelerating of people shifting away from physical and downloadable music to streaming services. Another trend Spotify is benefiting from is the podcast boom, with podcasts like The Joe Rogan Experience taking off in popularity, thus creating new monetization for Spotify and increasing both their users and ad revenue. Gen-Z and Millennials also both prefer listening to whatever they want, whenever they want, as opposed to traditional radio schedules. Lastly, the trend of having device ecosystems in your house like speakers or virtual assistants integrates Spotify even more into daily life. All of these tailwinds provide a great foundation for continued growth and market leadership.

There are also tons of moats and differentiators that Spotify has that prevent competitors from replicating their business. One of their moats is its scale—Spotify has over 600 million monthly active users, which is something that every single competitor really struggles to match. And since so many people use it actively, it creates a network effect, meaning more users attract more artists, and the more data it has, the better the recommendations it can make for users. Another huge moat is its content library and licensing that includes exclusive podcasts and deep and broad music options. And lastly—and probably most importantly—the company has a really good reputation and is widely seen as the go-to streaming platform globally, especially by Gen-Z. All these factors together make it very difficult for any competitor to replicate its user experience and engagement.

Spotify has a ton of brand stickiness and I see Gen-Z remaining loyal to Spotify for a couple of reasons. Firstly, because Spotify has a very strong connection with Gen-Z, because a lot of Gen-Z has grown up with Spotify as their go-to, which creates familiarity and habit with the app. Spotify also creates a personalized experience with the user that keeps users coming back to the app for features like the DJ and the Daily Mix. This loyalty is clearly shown in its high free user conversion rate, showing that people—not only Gen-Z—like the product so much they are willing to pay for it. Spotify is almost part of Gen-Z culture and while the competition may be fierce from competitors, I don't see a company in the industry taking Spotify’s place.

"While Spotify may trade at a premium valuation as suggested by their price-to-sales ratio, the valuation is supported by the numbers. The stock has strong fundamentals, with the company being profitable with $2.3 billion in free cash flow in 2024 and $225 million in net income in Q1 2025. There has also been consistent revenue growth—15% YoY last year—and that growth has shown no sign of slowing down. They also have improved gross margins, with the company hitting 31.6%, proving that the company is becoming more efficient. Spotify may trade at a premium valuation, but the numbers back it up. It's profitable, scaling, and expanding margins. This isn’t a “trend stock”—it’s a proven digital platform with a defensible model. The hype may have launched it, but fundamentals are what keep it moving."

Spotify is definitely a long-term compounder play rather than a momentum play for a few reasons. Firstly, the company is very solid—being profitable and cash-generating with over €2.6B in trailing free cash flow and €509M in Q1 2025 operating profit. Secondly, the company is a market leader with 600M monthly users. Thirdly, the company has solid growth every year and multiple revenue methods with its subscriptions and ads. Fourthly, it has strong brand loyalty, especially among Gen-Z, that means that the product will continue to be used for a long time. For investors betting on the future of digital audio and Gen-Z's media habits, it's one of the few public names offering both scale and upside.

Spotify is suitable for a disciplined investment strategy because it's no longer a tale of hope-growth—it’s an earnings, global business with expanding margins and great free cash flow. Its leadership in audio streaming, hyper-brand loyalty in Gen-Z, and fit into broader trends like mobile-first consumption and AI personalization make it greater than a fad trade. While its valuation is rich, it's backed by real execution and not hope. To long-term investors who are interested in owning category leaders in trend-shaping spaces, Spotify is a bet on behaviors that won't go away.

Some key price levels to watch for are if the stock dips down to 750–755—below would be a good long-term entry point. However, on the flip side, the stock going to 785 with good volume would show renewed investor confidence and would be a strong entry point. A key catalyst would be the earnings report before the market opens on July 29, 2025.

Duolingo, Inc.

Company: Duolingo, Inc.
Ticker: NASDAQ: DUOL
Sector: Educational Technology (EdTech) Key Narrative: Duolingo has reshaped—and is reshaping—how much of the world approaches learning language. With its gamifying of learning in 5-minute bursts, Duolingo is trying to be a company that is native to and used by the mobile-first generation to learn all sorts of things. However, the question is: can the company survive in an age where large language models like ChatGPT can teach you things better than a loud owl ever could?

This stock is a growth case. It currently leads the global mobile language learning market and has carved out its own niche with a unique user experience and a strong brand identity. The company has also shown growth in past years, with its revenue growing 50% YoY and the company recently becoming adjusted EBITDA positive. The only question is whether the company can maintain its momentum, scale its paid subscriptions, and innovate faster than some of its AI competitors.

The risk level is moderate to high. This is mainly due to a few things: firstly, the revenue of the company is dependent on the ability to convert free users to paid users, or they risk stalling revenue growth. There is also AI disruption risk, which could affect Duolingo's relatively static model. There might also be market saturation, meaning they may not have much room to grow in their category because they are already number one in language learning.

Duolingo is ultimately one of the few education companies that doesn’t feel like school, and for Gen-Z, it’s a very natural fit. Yet the company isn’t a totally stable, mature business but rather a growth-stage tech brand navigating an increasingly evolving landscape and market. So is this a disciplined investment? The answer is: it depends—if you believe that Duolingo can continue to stay ahead of the curve. Otherwise, it will be merely another company that rode the hype until the streak ran out.

Duolingo isn't merely a brand that markets to Gen-Z—it actually acts like Gen-Z. This can be seen in its TikTok marketing strategy, where the company has full-blown cultural fluency. Its trademark green owl is self-aware, unhinged, and completely meme-savvy on that platform. The product also fits perfectly into the generation’s behavioral patterns with its quick learning, streaks, and gamified content. And the app is usually on our phones not because we feel pressured to download it, but rather because it feels both easy and normal to use. Duolingo has ultimately embedded itself in our generation’s lifestyle—it’s not hype, it’s habit.

In terms of sustainability and ethics, Duolingo is very much ethics-focused. Duolingo offers free education to millions globally, which is a big social impact move. Its tests are also way more accessible and cheaper than standardized tests like TOEFL or IELTS. Lastly, the company’s leadership is very transparent and speaks on ethical AI usage and accessibility. All of these align with Gen-Z’s values and make Gen-Z even more likely to use the app.

Duolingo does have real demand; people genuinely love the product. This demand has been driven by the viral culture that surrounds the app. This can be shown in the 100M+ downloads and tens of millions of active users. Many people also have long streaks—sometimes over 1,000 days—showing that Duolingo has become a habit. While their TikTok marketing is viral, it does not create the demand. What creates the demand is the product and the idea that one can learn a language day by day in slow bursts.

Duolingo’s revenue has grown by 40%–50% YoY from 2021–2024, and that’s been driven by its growing user base, higher paid conversion, and expansion into new areas of teaching like math and music. However, that growth has, of course, decelerated as its base has grown. The language core of the company is now mature, so growth needs to come elsewhere—in places like expanding its ARPU, creating new products (like it did with math and music). Ultimately, the company’s growth rate was definitely real, not merely hype-driven. However, the company is approaching the "prove it" phase of the S-curve, meaning it must show that its growth is maintainable. What will define its ability to continue growth is whether the company can monetize habits. They already have the users—but can they make them pay?

Duolingo is not printing cash just yet, but it does have a very efficient business model. Firstly, its strong gross margins—being 70%–75% (2023–2024)—show the company’s strong scalability structure, which makes it very efficient for a consumer app. Its operating margins have not been great, but they are improving and are doing well now. That past struggle is mainly because in past years there was a lot of development, meaning there was a lot of money put towards marketing (to grow the brand), R&D (to add subjects), and content production (like AI features or courses). However, now that everything has been built, the operating costs have decreased. The adjusted EBITDA was positive in multiple quarters in 2024 and improved substantially in Q1 of 2025, showing how the cash burning has stopped. Duolingo has finally become profitable in 2025, which is a huge milestone. In prior years, losses were slowly shrinking, and in Q1 of 2025, the company reported a net income of $35M, which shows its efficient scaling. This marks a shift from a company that once burned cash every year into one that is going to be profitable. The base of this income—its subscription—is a pretty stable and predictable base. The company is also innovating, adding AI-driven premium features that draw subscribers and thereby increase the average revenue per user. Duolingo has clearly evolved from a fast-moving startup into a profitable high-margin platform, driving the risk to invest lower.

Duolingo is also financially quite strong. It can definitely withstand economic downturns and is not overly reliant on investor optimism. Its financial strength is mainly due to a few key factors. Firstly, the company has a lot of cash and equivalents—with over $885 million in cash and another $115 million in short-term investments. This large amount of cash allows the company to invest, innovate, or get through economic downturns without fear. Secondly, the company has only $54.6 million in debt, which is far outweighed by the cash it has, and it has no heavy interest rates hurting cash flow. Lastly, the company is generating strong cash flow with great margins and capital efficiency. This supports investment into various areas without worrying about raising more capital. This strong financial standpoint gives the company the opportunity to continue to innovate and stay ahead of the curve, lowering risk for the investor.

Metric Duolingo Coursera Babbel

Revenue Growth (YoY) ~39% ~7–9% ~31% (2022)

Gross Margin ~72–75% ~54% Not disclosed

Price-to-Sales Ratio ~26× ~1.9× N/A

These metrics display a few things. Firstly, they show that Duolingo is a very high-growth outlier in this industry, with its revenue growing four times faster than Coursera’s and even faster than Babbel’s (whose numbers are outdated since it’s a private company). Its gross margins are also top-class—at the very top of EdTech—far outperforming its competition. Its price-to-sales ratio does look ridiculous; however, when you consider the company’s rapid growth, high-margin product, and expansion into new verticals, it doesn’t look so ridiculous. Coursera’s price-to-sales ratio shows how the market doesn’t really reward EdTech unless they scale like a software company—which Duolingo did.

Duolingo is also benefiting from a few broader macro trends. Firstly, they are benefiting from direct-to-consumer learning that both Gen-Z and Millennials prefer. Secondly, Duolingo is benefiting from the new age of short-form content because its education is bite-sized and quick—perfect for the short attention spans of Gen-Z. Thirdly, Duolingo is benefiting from the new trend of AI-enhanced learning because the company is integrating AI into certain features within the app. Lastly, Duolingo benefits from the global demand for English fluency, as English is still the dominant language for trade, education, and work—and Duolingo helps people learn it easily.

Duolingo’s moat and differentiation come from a few different places. Its first moat comes from its brand marketing. The Duolingo green owl is an icon with deep Gen-Z relevance and is a complete marketing moat that no one in all of EdTech has come close to. And the green owl is especially hard to copy without it seeming forced. There is also brand stickiness in the user experience, with all the streaks, gamification, and notifications pushing you to continue learning. Competitors can theoretically copy these features—but not the behavioral design history of the Duolingo experience. Ultimately, the biggest moat is their scale. This company is hard to replicate mainly due to their sheer size, user base, and the app’s ability to be part of so many people’s habits.

Duolingo has one of the stickiest brands in Gen-Z culture, with Duo the meme owl being a meme engine and a complete TikTok icon. Duolingo isn’t just a brand—it’s a vibe. Secondly, because Duolingo’s product essentially creates habit for many, it creates ritual-based loyalty among users, making it hard for them to leave the product due to a sort of emotional loyalty. However, trends do change fast, so Duolingo will have to continue to innovate and reinvent itself to stay on top.

Duolingo’s very high valuation is not merely hype, but the price does assume flawless future execution. First off, if you look at the numbers, Duolingo has a 26x price-to-sales ratio, which is one of the highest in consumer tech, and its market cap is greater than $20 billion based on only ~$810 million in revenue. So its high pricing is mainly based on high past growth. The fundamentals are also quite strong, with the company having:

• YoY Revenue Growth: ~39%

• Gross Margin: ~72–75%

• Free Cash Flow Margin: ~45%

These metrics show that Duolingo is more than just an app—but rather a very profitable revenue machine. However, the market does have very high expectations. This kind of valuation expects the company to continue full steam ahead and successfully expand into new verticals, defend against AI commoditization, and continue to churn out high subscriber conversions and revenue growth. Basically, the market expects Duolingo to become the Netflix of learning—which means that there are very, very high expectations. However, as you can see in those numbers, the valuation is definitely not only hype.

My investment thesis is definitely not about a short-term momentum gimmick stock, but rather a high-margin, great learning platform with very high upside. However, it’s only worth holding long-term if you believe in the stock—and believe that the company can stay relevant, that learning will stay mobile and personalized, and that Duolingo can expand beyond language into the broader education vertical. All this makes the stock a moderate risk with a high upside.

Duolingo fits into a disciplined investor’s strategy as one of those rare tech companies that is both culturally sticky and has the financials to back up the stickiness. With its software-level gross margins (~73%), reliable recurring revenue, strong free cash flow, and a moat built on brand, data, and habit formation—Duolingo is not a value stock mainly due to its high price. However, it’s the kind of stock that fits into a long-term, growth-focused portfolio, only if you’re careful about your entry position and sizing.

With Duolingo trading at a premium of ~$470, watch for a pullback to the $420–$450 range to enter. However, on the flip side, if it goes up to $530–$550, that could signal investor confidence and new momentum, so an entry there could also be favorable. Some key catalysts to watch out for are: deeper adoption of AI features like Roleplay and Explain My Answer, successful traction in new verticals, rising institutional use of the Duolingo English Test, and improving ARPU through subscription tier upgrades.

Allbirds Inc.

Company: Allbirds, Inc.
Ticker: NASDAQ: BIRD
Sector: Sustainable Apparel & Footwear
Key Narrative: Allbirds was shaping up to be the Patagonia of our generation with its environmentally friendly products worn by tech bros and even Obama. However, after a great IPO, the company got stuck in the big gap between hype and habit. Allbirds became a warning about greenwashed branding with no actual staying power.

Allbirds' revenue growth was never truly sustainable. From 2019 to 2022, the company’s growth relied almost solely on opening new stores across the globe, launching new product lines, and pushing into wholesale channels. However, as interest in the company’s products cooled, revenue declined sharply. Revenue peaked in 2022 at $297.8 million but dropped to $254.1 million in 2023 and further to $189.8 million in 2024—a 35% drop over two years. Much of this decline was due to bloated inventory, underwhelming product launches, and operational inefficiencies that resulted from growing too quickly. The company now seems to be moving toward a more capital-light model, including closing stores and outsourcing distribution. This looks less like an attempt at growth and more like an effort to stop the bleeding. While the company has achieved modest revenue stabilization, it appears to be driven by cost-cutting and one-time fixes rather than organic growth fueled by brand momentum or consumer demand. The current sales trajectory reflects a company still struggling to find its footing.

Allbirds’ business model has struggled to provide profitability—even when the company was growing rapidly. Its gross margins, once a strength due to its direct-to-consumer model, have decreased steadily from 56% in 2020 to 42.5% in 2024. This decline is mainly due to price reductions and increased supply chain costs. On top of that, the company has posted net losses every year since going public, with a $152 million loss in 2023 and a $93 million loss in 2024. Operating costs remain high, largely due to marketing and research and development for product expansion that has not translated into sales. Though the company has implemented layoffs and cost-cutting measures, Allbirds has not demonstrated that it can scale profitably. In summary, its business model is burning cash and remains inefficient. Allbirds' balance sheet offers little to no protection if losses continue. With just $39.1 million in cash or cash equivalents—down from $66.7 million at the end of 2024—it's very problematic that the company ended Q1 2025 with a $28 million loss. At this rate, All birds would likely need to raise capital within the next 6–9 months to stay afloat.

Company Allbirds Nike Adidas On Holding
YoY Revenue Growth -18.30% -9% 13% 28%
Gross Margin 44.80%. 41.50% 52.10%. 60.30%
Price-to-Sales Ratio 0.37 1.80 1.63 12.50

Allbirds’ revenue has declined by over 18% year-over-year, and its price-to-sales ratio is a mere 0.37, reflecting heavy investor skepticism. In contrast, other major shoe companies maintain far higher ratios. This valuation gap signals investor doubt that the company can rebuild its weak revenue growth. While Allbirds' gross margins are decent, they still lag behind competitors like Adidas and On Holding, underscoring ongoing challenges in cost efficiency.

Allbirds does benefit from broader macro trends. It stands to gain from rising demand for sustainable and eco-friendly products, a trend that particularly resonates with Gen-Z consumers who value natural materials. Another favorable trend is the growing shift toward comfort, a focus of Allbirds’ design philosophy. However, despite these tailwinds, Allbirds has struggled, primarily due to intense competition in these spaces. Larger companies are making strides in sustainability, and pricing pressures along with difficulties in scaling have prevented Allbirds from fully capitalizing on these trends. The metaphorical moat for Allbirds is its strong brand identity—centered around simplicity, sustainability, and comfort—which resonates with many eco-conscious consumers. However, the core product's materials and designs are not highly proprietary, making it easier for competitors to replicate or create similar products. Maintaining differentiation will require continuous innovation and capital—resources that Allbirds currently lacks. Allbirds has a small but passionate customer base, primarily composed of Millennials and Gen-Z consumers who appreciate its climate-conscious mission. The real challenge is attracting customers beyond this eco-conscious core. To do that, it must broaden its appeal, innovate, and compete in an increasingly crowded marketplace where sustainability is becoming the standard.

Allbirds' current valuation at approximately $8.55 per share—significantly lower than its IPO price of $15—reflects a steep decline in investor confidence. Its current market cap of $68.89 million places it among micro-cap companies, suggesting that investors are highly wary of its ongoing challenges with profitability and growth. Insider trading can sometimes indicate a cautious outlook among executives. In Allbirds' case, both the CEO and CFO sold shares at $6.15 for approximately $15,000 and $11,000 respectively. However, this was likely for tax purposes, which is a common practice among executives. Allbirds is more of a speculative turnaround play than a solid long-term investment. While its brand message resonates with Gen-Z and other groups, the company faces major challenges: declining sales, thin margins, and intense competition. Without clear signs of sustained revenue growth and significant operational improvements, investing in Allbirds is highly risky and hinges heavily on management’s ability to execute a major turnaround. If you are a disciplined growth investor, it’s unwise to invest in Allbirds at this stage. This stock fits more into the category of an emotional trade rather than a disciplined investment strategy. Its financial metrics are extremely poor, and even if you admire the company’s values and identity, you must recognize that this alone should not justify an investment—especially when the path to profitability remains extremely unclear.

A key catalyst to watch is Allbirds' Q2 2025 earnings report, expected around August 6, 2025. This report will provide insights into the company’s ability to stabilize its financial performance and execute its turnaround strategy.

Snap Inc.

Company: Snap Inc

Ticker: NYSE:SNAP

Sector: Internet Content & Information / Communication Services

Key Narrative: Snap Inc. was once the dominant social media for Gen-Z users’ communication; now it's competing against TikTok and Instagram and seemingly losing, with the company being consistently unprofitable and losing market share.

Snap is a speculative investment. The company does have ambitious long-term goals in places like creator monetization and augmented reality, however, it continues to struggle with profitability, user growth, and monetization efficiency—especially compared to sites like TikTok and Meta, two giants of the market.
Snap is high-risk due to the fact that it is consistently unprofitable, faces big competition in its sector, and has uncertain returns from its long-term investments in augmented reality and other hardware.
Snap Inc. looks more like a lesson in crowd psychology than a disciplined investment. Its share price has swung up and down in the past on hype cycles. While there is potential in Snap with its hold on Gen-Z as one of the leading messaging apps, to bet on Snap would be to bet on beliefs in live tech, AR, and camera-centered shopping, rather than shown progress toward profitability and/or market leadership.

Snapchat is genuinely embedded in Gen-Z; however, its grip is not as firm as it once was. The reason why it's genuinely embedded is because "snapping" is still quite popular, and so is simply messaging on the app. Its filters are also a fun way to express oneself, and of course its privacy and "you had to be there" vibe is still very appealing. However, other social media platforms like Instagram and TikTok have overtaken Snapchat in appeal with their emphasis on short-form content creation. While Snapchat is genuinely embedded in our generation’s lifestyle and its usage is real, it's not loud. It's become the quiet center of Gen-Z communication, while Instagram and TikTok have become the loud center of Gen-Z culture. This also makes Snapchat less profitable because the money ultimately comes from digital advertising, and it's hard to advertise within messaging.
Snap does align with Gen-Z values on privacy and mental health; however, it is a follower, not a leader, on sustainability and ethics and corporate responsibility. While Snapchat does support mental health, there is a lack of commitment to other topics like climate change or ethical sourcing.
Snapchat's demand is real, not manufactured, and this is evident with its streak culture, messaging infrastructure, and low influencer presence. Ultimately, the demand does come from users wanting to stay connected. That does create user retention; however, it doesn't create profitability because ultimately Snapchat doesn’t make profit with messaging.

In terms of growth rate, Snapchat's growth has been volatile and difficult in the past few years. During COVID, Snapchat exploded with ad surges and increased Gen-Z engagement; however, now Snapchat's growth is dependent on small product tweaks, international expansion, and cost-cutting. Snap's growth path currently looks unsustainable. Right now, it looks as if Snapchat is on the defensive, meaning it is more reactive to external factors like Apple's privacy changes and competition from other social media platforms rather than leading the sector it's in.
Snapchat's business model is poor with its thin margins and its big dependence on the digital ad ecosystem, and it struggles to convert scale into sustainable profits. Another big problem is Snap's reliance on high-cost infrastructure and its inability to monetize its platform. Also importantly, Snapchat does lack pricing power in the digital ad market, meaning that the company lacks the ability to set prices for its services at levels that maximize profitability. Meanwhile, companies like Meta and Google do control much of the audience and can maximize their profits. Although Snapchat is growing rapidly, it's ultimately inefficient at creating profits out of revenue. And all of these previously listed factors lead to a situation where Snapchat is burning more capital than it's getting.
Snap also does not have a strong balance sheet, therefore limiting its ability to withstand an economic downturn. This, coupled with Snap's heavy reliance on investor optimism, means that if an economic downturn occurs, Snap may struggle—especially if investor sentiment changes. Also, its high costs in infrastructure and research and development make it even more at risk during a period of financial instability. Essentially, Snap’s balance sheet is more dependent on investor optimism than actually having solid and independent financial health.

Metrics

Metric. Snap Inc. META TikTok
Revenue Growth (YoY). 16% in 2024 21.94% in Q1 2025 42.8% in 2024
Gross Margin 56.9% in 2024 81.7% in 2024 21% in 2024
Price-to-Sales Ratio 4.01 in 2024 9.15 in 2024 Data not available

Snap did grow faster than prior years in 2025 but did so at a smaller rate than Meta or TikTok, showing how increasingly unpopular Snap is becoming compared to those companies. Snap's gross margin, though it improved, still trails Meta by a very wide margin and reflects the high costs. The price-to-sales ratio displays the growing lack of confidence from investors in Snapchat’s ability to monetize its user base. Snapchat was also unprofitable in 2025, as it ultimately lost about $698 million in comparison to its competitors that gained billions. Overall, while Snapchat is growing, it is doing so with persistent losses, thin margins, and a poor business model.

Snap is benefiting from broader macro trends including the shift to digital advertising, the growing creator economy, and the short-form content boom. However, Snap has and currently is struggling too monetize these tailwinds as well as their competitors have. This is most likely due to their smaller scale and weaker data infrastructure.
Snapchat does have a moat, though it is a little smaller than a number of their competitors. Its biggest advantage is that it has a highly engaged Gen-Z user base and a number of features like its ephemeral chats and images, its private communication, and its augmented reality development. The issue is that a lot of these features are being replicated by competitors, like Instagram Stories and TikTok effects, for example. Snap’s only moat is essentially its cultural relevance in the messaging world and its product innovation listed prior. The issue is that without strong monetization, Snap is vulnerable to companies with more money like Meta and TikTok.
Snap currently has strong brand stickiness to Gen-Z. It is probably one of the most used platforms of the generation, with some of its features like chats, snaps, and stories being ingrained in our generation’s daily routines. And unlike other social media platforms, which are more performative, Snap has become essentially a messaging app, which has created habitual use and strong loyalty. However, this loyalty and popularity haven't resulted in much monetization. Snap's long-term relevance will depend on whether it can come up with innovative ideas that appeal to youth culture and actually generate revenue from these ideas—something it has struggled to do in the past.

Snap is currently more hype than fundamentals. While the company does have a strong cultural connection and a loyal Gen-Z user base, its valuation isn’t supported by its continuous unprofitability. Snap posted significant losses in 2024 ($698 million), and though its gross margins have improved, they are far behind its biggest competitor, Meta. Its price-to-sales ratio being 4.1 does suggest there is some investor optimism, but it's not close to higher-growth stocks, meaning that investors are skeptical that Snap can become profitable and efficient. Snap currently seems to be trading more on hope of improvement rather than showing actual financial results.
Over the last year, there has been a lot of significant insider selling at Snap Inc. Executives—CEO Evan Spiegel, CTO Robert Murphy, CFO Derek Andersen, and General Counsel Michael J. O'Sullivan—have all sold millions in shares. This pattern of insider selling may display a lack of confidence in the company’s future.

Snap currently looks like a speculative momentum play at the moment—unless you think that they can actually monetize their innovation, which I don't think they can. On the flipside, Snap is a very risky investment because currently they have a very poor business model with very thin margins, big infrastructure and research and development spending, and ultimately can't make money. So essentially, they spend too much and make far too little. Betting on Snap, especially due to those reasons listed above, is highly risky.
From a disciplined investment strategy standpoint, this stock fits into the high-risk portion of a broad portfolio. The stock does have potential with its innovation and loyal user base; however, that’s offset by its current state: limited pricing power, losses, and insider selling. A smart investor would only buy Snap if they can tolerate loss and believe in its long-term upside. Snap ultimately isn't a stock to rely on.
Personally, I wouldn’t invest in Snapchat—mainly due to the fact that the current fundamentals don’t quite support a long-term position.
Lastly, A catalyst to watch out for is Snap's Q2 2025 report, which could provide further insights into Snap’s financial trajectory.

ON Holding AG

Company: On Holding AG (ONON)
Ticker: NYSE: ONON
Sector: Athletic Apparel & Footwear
Key Narrative: This company is a revolutionary footwear and athletic apparel company.
This stock is a growth stock.
The risk level is low—the probability of major loss over a long period of time is unlikely, especially with the growth that is expected.
This stock is a disciplined investment with long-term value.

This brand is gaining popularity with Gen-Z, specifically in the running world. It's increasingly competing with larger and more historic athletic companies like Nike and Adidas.
The company's values of sustainability align with Gen-Z’s growing belief in the importance of sustainability in products.
On Running’s product is loved by its users due to their comfort and style—specifically among older Gen-Z, who show a trend of wanting to adopt new fitness trends. Those who adopted it stayed because of the quality of the product.

The company's growth rate is sustainable; however, it is currently seen as a moderate buy among Wall Street analysts due to its expected growth. It's not expected to repeat the same level of growth it had last year.
On’s business model is made up of innovation, a strong brand, and direct-to-consumer expansion. This model is efficient—particularly due to the technological developments in its product, especially with its CloudTec cushioning technology. Its direct-to-consumer expansion also allows the company to profit more by decreasing its dependency on third-party retailers.
On does have enough cash to withstand economic downturns, and it doesn’t seem to be reliant on investor optimism. Analysts have expressed their confidence in On Holding AG’s financial resilience. On also has more cash than debt, meaning it has high, robust liquidity.

On Holding AG (2024 Performance)

On Running vs Competitors (Nike & Lululemon)

Metric On Running Nike Lululemon
Revenue Growth (YoY) 2024: 32.3% 2024: 0.28% 2024: 18.60%
Gross Margin. Q3: 60.6% (highest since IPO). Q3: 44.6%. Q3: 57.5%
Price-to-Sales Ratio 6.55 2.22 8.5

On outperforms its competitors in almost all of these metrics. The revenue growth being quite high is important, as I see this company as a growth stock—and revenue growth is a big indicator of that. It also has a high price-to-sales ratio and gross margin, meaning it’s valued much higher than Nike and is extremely efficient at producing and selling its products.

On is benefiting from various broad macro trends like fitness culture, sustainability, the shift to direct-to-consumer, high-performance products, and the popularity of wearing athletic clothes casually.
The main differentiation is the technology involved—CloudTec—which is a cushioning system that gives the user a unique experience that is comfortable while also transferring the energy of your foot to the ground efficiently. This technology is very hard to replicate by competitors.

Gen-Z will most likely remain loyal to this company due to the brand’s alignment with Gen-Z values such as sustainability and its social media presence, with big influencers wearing their products. However, as with most clothing companies, there is always a risk of fashion trends changing or competitors taking their market share.

On is backed by data for the most part—specifically its revenue growth, its unique product, and the globalization of the brand. However, the stock’s value may be a little inflated due to the hype around its sustainability efforts.

The stock is most likely being traded rationally—especially with its growth prospects, strong product, and sustainability focus giving the stock long-term value. Social media platforms have and can increase the momentum of short-term shifts, but not in the long run.

On Holding AG is worth a long-term investment, especially due to its prime position in the market and its ability to carve out a nice niche for itself in the sportswear world—where they are delivering a premium product while also making it sustainable. This should make it a top choice as the world looks to become more sustainable while also wanting performance.

This stock fits into the strategy of growth investing due to the company having grown a lot in the past few years, and it shows no signs of slowing down with its focus on globalization. Its revenue growth is predicted to be high next year, and its gross margin is growing—the largest it has since last year—and with globalization, it’s expected to rise. However, there are risks, mainly coming from competitors like Hoka, Adidas, and Nike.

You should probably wait to invest in On until there is a dip, because the company’s current price may be inflated with a little bit of hype surrounding its potential for large growth in the next few years—especially with its increasing sustainability initiatives and its entry into new markets across the world.

Monster Beverage Corporation

Monster Beverage (MNST) – Popular energy drink brand with younger consumers.
NYSE: MNST
Consumer staples sector
Key Narrative: Monster is still a giant in its sector; however, it has to continue to innovate if it wants to keep its edge in a market that is rapidly moving forward.
This stock is a growth stock mostly due to the fact it has consistently grown every year; however, if you invest, you should be careful of the competitive pressures.
The risk level is moderate, mainly due to its competition with brands like Red Bull, Celsius, C4, Bang, and others.

Monster's brand is genuinely embedded in our generation’s lifestyle, and it's driven mainly by effective marketing. The drink itself is strongly associated with extreme sports and gaming, which connect to Gen-Z interests. So while it is genuinely embedded in Gen-Z, the appeal wouldn't be as big without the effective marketing strategies.
Monster does make an effort to be sustainable, and this is seen in packaging initiatives and its commitment to reducing its carbon footprint. However, with that being said, Monster is a processed drink, and the company itself isn't as transparent as other companies, so it's hard to know how sustainable it really is. So while it does make an effort to be sustainable in some areas, it isn't as sustainable as other brands, and this can be viewed as greenwashing rather than a commitment to change.
Monster's demand is a mix of real and manufactured demand. Monster has a strong, loyal following mostly due to its product. People genuinely love the taste, energy boost, and its variety. Its longtime domination of the market especially displays its appeal and functionality. However, from what I can tell, Monster does use influencers and sponsorships to build visibility, especially to younger audiences who see their favorite athletes, influencers, and celebrities drinking the beverage. This creates FOMO, especially with the fact that Monster sometimes creates limited products. To summarize, while there is influencer-driven FOMO, most of the demand comes from genuine fans of the product.

Monster's growth rate is sustainable, particularly with its brand strength being quite strong in the energy market—only second to Red Bull. It's also sustainable because of its product diversification and its global expansion. However, there has been some aggressive expansion in its past with its sponsorships and some of its new product hype and its limited edition items. To surmise, its current growth rate is sustainable because only a small part of its growth was a function of aggressive expansion.
Monster's business model is extremely efficient, and the company boasts high margins of around 50–55%, which is strong for the sector. The company also has a high return on equity (ROE), meaning Monster is great at generating big returns while not investing excessively in assets. It also has a low debt-to-equity ratio, which means the financial risk is low. Overall, Monster isn't just a fast-growing company, it's also an efficiently growing company.
Monster can withstand economic downturns due to a few factors: its massive cash reserves, its very tiny debt, and its cash-generating abilities. So to summarize, Monster's balance sheet is very good—it can withstand economic downturns, meaning it's not reliant on investor optimism.

Monster Beverage vs. Celsius Holdings, Inc. (2024 Comparison)

Metric Monster Beverage Celsius Holdings, Inc.
Revenue Growth (YoY) 4.94% 3%

Gross Margin 55.5% (Q4 2024) 50.2% (2024)

Price-to-Sales Ratio 7.16 5.98

Monster Beverage outperforms one of its main competitors in almost every statistic. I couldn't find any recent information on any of the other competitors that would be valuable for this comparison due to other companies being private, or having only outdated data available, or being very new companies. We see, however, that the revenue growth is higher than its competitors, which is important because I see this as a growth stock and revenue growth is a big indicator of that. Monster also has a higher price-to-sales ratio and gross margin, meaning it's valued higher than Celsius and that Monster is more efficient at producing and selling its products.

Monster is benefiting from various different broad macro trends, like in the health and fitness region where customers are looking for products that boost energy. This has boosted demand. There is also a global energy drink consumption growth. Also, the sustainability benefits Monster because it does appear they are making efforts to be more green.
The main moat is its brand equity, global distribution, and innovative products. Its business model is hard to replicate due to its sponsorships, good marketing, and loyal fanbase.
Monster has built a loyal fanbase in Gen-Z with an authentic image and the fact it has involved itself with things popular with Gen-Z like gaming and extreme sports. It's shown an ability to adapt to evolving trends. However, if the company wants Gen-Z to stay loyal, it will have to stay relevant to Gen-Z's lifestyle—like the current trend of health and sustainability.

Monster's valuation is somewhat supported by the fundamentals because it does have a strong financial performance, high brand loyalty, and global growth potential. However, its high price-to-earnings ratio does suggest that the stock could be overvalued, with a smaller portion of the stock's current value being due to hype and not data-backed growth prospects.

There are no major signs of insider selling at the company. There is also little insider buying, suggesting that while there is no doubt about the company by the insiders, there is also no extreme confidence.

MNST is a stock worth holding in the long run. This is primarily due to a few things. Firstly, it has a very strong position in the market and has a loyal fanbase. Secondly, the company has high gross margins at 60% and has maintained a steady YoY growth, and on top of that, the energy drink market is still expanding globally. This shows that it has been profitable and looks to continue to be. Thirdly, the company does benefit from some trends, such as the new trend around performance beverages. All of these factors point toward the thesis of this stock being a stock that's worth being held in the long term rather than a momentum play.
Monster fits quite well in a long-term investment strategy due to its consistent growth, high profitability, its debt-free nature, and its global expansion. Overall, it's a great company—however, even great companies can be bad investments, so look for a good entry point. Don't buy MNST, for example, if there is unwarranted hype around the stock, as it would be overvalued.
Strong long-term entry points would be between $47–54, as the stock has bounced before. Anything between $54–57 would be a good/okay entry point, and anything above that would be, in my opinion, an overvalued zone to buy at—at least at this moment. Moving forward, it's important to pay attention to three important factors:

1. Competition, as the company has strong competition in Red Bull (private) and Celsius.
   
   

2. Valuation – make sure not to buy at a hyped-up price.
   
   

3. Earnings growth of the corporation.
   
   

These are all very important, as knowing when to enter and when to exit is key.