Snap (SNAP) has endured a rough year, with shares down over 34% year-to-date and 24% since its Q2 earnings report on June 30th, which fell short on profitability and highlighted persistent competitive pressures.
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Now trading at a one-year low, the stock reflects profoundly negative sentiment. However, I believe this sell-off is overdone and could offer a compelling entry point for long-term investors. Therefore, I am tentatively bullish on SNAP while looking for appropriate entry levels.
Disappointing Q2 Earnings Report Creates Investor Panic
In Q2 2025, Snap reported an adjusted loss of $0.16 per share, slightly worse than analyst expectations of $0.15. Revenue came in at $1.35 billion, up 9% year-over-year and in line with consensus. However, a technical glitch in Snapchat’s ad-buying platform allowed certain advertisers to secure bids at steep discounts, weighing on revenue growth and resulting in the company’s slowest expansion in over a year.
This lackluster performance stood in stark contrast to the strong ad results posted by peers such as Alphabet (GOOGL), Meta (META), and Amazon (AMZN), fueling doubts about Snap’s ability to compete effectively against AI-powered rivals. Investors responded decisively: SNAP shares plunged 24% in the days after earnings, sinking to a new 52-week low.
It’s Not All Bad News
Despite the earnings miss, Snap posted several encouraging metrics in Q2. Daily Active Users grew 9% year-over-year to 469 million, led by 15% growth outside of the United States; monthly active users increased 7% to 932 million.
Free cash flow turned positive at $24 million, a significant turnaround from a $73 million outflow a year earlier. Both revenue and adjusted EBITDA improved meaningfully from last year, while Q3 guidance was broadly in line with consensus, with adjusted EBITDA slightly ahead. Ad revenue showed signs of recovery in May but softened in June and July following the broader rollout of Sponsored Snaps. Management expects conditions to improve in August and September.
Global Average Revenue Per User (ARPU) held steady at $2.87, but monetization trends were stronger in developed markets: North America ARPU rose 9% to $8.33, while Europe climbed 13% to $2.65.
Building for the Future
Snap is doubling down on augmented reality (AR) and AI tools to differentiate itself in the competitive digital ad market. Spotlight, its short-form vertical video feature, now reaches over 550 million average monthly users and accounts for more than 40% of total content time on the platform.
Snapchat+, the company’s paid subscription service, is expanding quickly with nearly 16 million subscribers—up 64% year-over-year. At its current pace, Snapchat+ is generating an annual revenue run rate of about $700 million, providing a growing revenue stream outside of advertising.
Looking further ahead, management is advancing its AR hardware roadmap, with the next-generation “Specs” glasses slated for a 2026 launch, part of Snap’s broader push into spatial computing and immersive content.
Meanwhile, new ad products such as Promoted Places and Sponsored Snaps aim to diversify revenue and lift ARPU over time. Snap’s strategy remains focused on scaling these innovations while maintaining strict cost discipline.
Why I Think the Market Overreacted
Q2 offered few positives, with Snap reporting a wider-than-expected loss, a revenue drag from an ad-platform glitch, and slowing ad growth. However, the 24% post-earnings sell-off has pushed the stock to levels that seem to discount a worst-case scenario. For contrarian investors, Snap’s expanding user base, rising ARPU in developed markets, and new monetization streams like Snapchat+ could provide meaningful upside if execution improves.
With strong product momentum and new features scaling, the company has a viable path to reaccelerate growth. Based on my analysis incorporating P/E, EV, and revenue multiples alongside a five-year EBITDA projection, I estimate Snap’s fair value at $10.50 per share—implying roughly 48% upside from current levels.
Is SNAP a Buy, Hold, or Sell?
According to TipRanks, Snap holds an average Hold rating based on 28 analyst reviews, which break down into four Buys, 23 Holds, and one Sell. The consensus price target stands at $9.22, implying ~29% upside from current levels over the next twelve months.
Oversold SNAP Stock Creates Buying Opportunity
Snap’s weak Q2 results rattled investors, but the market’s reaction looks excessive. Trading at a fresh 52-week low, the stock appears oversold. However, user engagement continues to climb, monetization in both the U.S. and Europe is improving, free cash flow has flipped positive, and new revenue streams like Snapchat+ are scaling quickly.
While challenges remain, these trends point to a credible path back to growth. For investors willing to weather near-term volatility, today’s weakness could present a buying opportunity. In my view, sentiment has swung too far negative, opening the door for long-term investors with patience.