Snap (SNAP) rallied more than 7% on Monday after Rothschild Redburn analyst Joseph Barker upgraded the stock to Buy and doubled his price target to $10, citing a clearer path to profitability and stronger revenue diversification heading into the company’s Q1 earnings on May 6.
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Barker said he is encouraged by Snap’s improving topline mix and tighter cost control. He believes the company’s core business (excluding Spectacles) is on track to reach GAAP breakeven in FY25 and become meaningfully profitable in FY26. Barker expects this shift to materially improve investor sentiment.
Here’s Why the Analyst Upgraded SNAP Stock
The analyst pointed to several key drivers behind the upgrade. First, Snap’s revenue base is widening, with Barker forecasting an 11% CAGR from FY25-28, driven by 7% ad‑revenue growth and fast-rising subscriptions. Subscription revenue is expected to jump from $745 million in FY25 to $1.76 billion in FY28, giving Snap a higher-margin and more predictable business.
Barker also sees gross margins rising from 55% in FY25 to 63% in FY28, with support from three key factors:
- Continued momentum in high‑margin subscription products
- Shift toward higher‑margin, no‑payaway ad formats such as Sponsored Snaps
- Better alignment of cost‑to‑serve with Snap’s highest‑ARPU regions
Barker called Snap’s target of over 60% gross margin in FY26 “very achievable” given the company’s product mix and cost improvements.
With shares still trading well below their historical multiples, Barker argued that Snap’s improving fundamentals, especially the move toward GAAP profitability, could help re-rate the stock as investors gain confidence in its long‑term trajectory.
Is SNAP Stock a Strong Buy?
Turning to Wall Street, analysts have a Hold consensus rating on Snap stock based on five Buys, 18 Holds, and one Sell assigned in the past three months. Further, the average SNAP stock price target of $7.93 per share implies 30.93% upside potential.
