What’s Next For SNAP Stock?

Snap (NYSE: SNAP) recently released its Q1 results, with revenue slightly above street estimates but earnings falling significantly short of expectations. It reported revenue of $1.36 billion and an adjusted loss of $0.08 per share, compared to the consensus estimates of $1.35 billion and an expected profit of $0.04, respectively. However, the company didn’t provide any outlook due to uncertainties about how the current trade policies under the Trump administration will impact advertising revenue for Snap. This disappointing earnings miss and lack of guidance did not sit well with investors, and the stock tanked 13% in after-market hours.

SNAP stock, with -19% returns since the beginning of the year (as of April 29th, 2025), has underperformed the S&P 500 index, which is down 5%. The stock has historically been volatile around its results period, as discussed in the Snap Earnings Preview. If you are looking for an upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

Image by Souvik Banerjee from Pixabay

Snapchat’s first-quarter performance in 2025 demonstrated significant growth in several key areas. Snap’s revenue reached $1.36 billion, marking a 14% year-over-year increase, primarily driven by strong growth in its paid subscriber base. Specifically, Snapchat+ saw its membership climb to 15 million, up from 14 million in the previous quarter. This subscriber growth contributed to a 4.6% year-over-year rise in average revenue per user (ARPU), which stood at $2.96. Furthermore, daily active users (DAU) also increased, reaching 460 million, a 9% jump compared to the same period last year.

This positive operational performance translated to a substantial improvement in profitability, with Snap’s adjusted EBITDA margin doubling to 8% in Q1 2025. Despite this progress, the company still reported a net loss of $0.08 per share. However, this represents a considerable narrowing of the loss compared to the $0.19 per share loss reported in the first quarter of the previous year.

Despite the positive financial and operational results, SNAP’s stock price is currently trending downward  following the earnings announcement. This decline appears to be primarily driven by two factors: the company’s failure to meet earnings expectations and the absence of future financial guidance.

Looking beyond the immediate reaction, the stock’s performance over the past few years has exhibited considerable volatility, with annual returns proving significantly less consistent than the broader S&P 500 index.

In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Considering the prevailing uncertainty in the macroeconomic landscape, particularly concerning tariffs and trade tensions, the question arises whether SNAP might face a similar period of underperformance relative to the S&P 500 over the next year, as it did in 2021, 2022, and 2024. Alternatively, could the company be poised for a recovery? While we are in the process of updating our valuation model for SNAP to incorporate the latest quarterly results, our current assessment suggests that the stock remains undervalued. Trading at approximately $8, SNAP’s stock currently has a price-to-sales ratio of 2.4x based on trailing revenues, which is notably lower than its three-year average price-to-sales ratio of 4.1x.

While SNAP stock looks like it is undervalued, it is helpful to see how Snapchat’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

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