Snap (SNAP) AI Stock Analysis

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Snap

(NYSE:SNAP)

58Neutral

Snap's strong revenue growth and user base expansion are key strengths, but profitability challenges and significant leverage weigh heavily on its overall score. Technical indicators suggest bearish momentum, and valuation metrics reflect current financial struggles. Despite these challenges, positive sentiment from the earnings call and potential for cash flow improvements provide some optimism.

Positive Factors

Financial Performance

Snap reported 4Q:24 upside, issued a good-enough 1Q:25 outlook, and highlighted key initiatives for 2025.

User Growth

Snap added 10 million Daily Active Users quarter over quarter, surpassing expectations.

Negative Factors

Competitive Landscape

Meta and TikTok are expected to gain additional U.S. digital share, while SNAP's share remains flat.

Revenue Growth

SNAP’s ad business is still only growing around 9% year-over-year, which is slower than its peers.

User Engagement

SNAP remains a bit behind the eight ball when it comes to social engagement and ML/AI infrastructure leverage vs. Meta, Google and Tik Tok.

Snap (SNAP) vs. S&P 500 (SPY)

Market Cap

$14.96B

Dividend YieldN/A

Average Volume (3M)30.14M

Price to Earnings (P/E)―

Beta (1Y)1.53

Revenue Growth16.40%

EPS Growth48.48%

CountryUS

Employees4,911

SectorCommunication Services

Sector Strength98

IndustryInternet Content & Information

Share Statistics

EPS (TTM)-0.42

Shares Outstanding1,442,210,800

10 Day Avg. Volume34,883,850

30 Day Avg. Volume30,144,075

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)2.95

Price to Cash Flow (P/CF)17.20

P/FCF Ratio21.70

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$12.35

Price Target Upside57.73% Upside

Rating ConsensusHold

Number of Analyst Covering31

Snap Business Overview & Revenue Model

Company DescriptionSnap Inc. is a technology and social media company headquartered in Santa Monica, California. It is best known for its flagship product, Snapchat, a multimedia messaging app that allows users to send photos and videos that disappear after being viewed. Snap operates in the social media and augmented reality sectors, providing innovative tools and experiences for communication and content creation. The company's products also include Spectacles, a line of smart glasses, and various augmented reality offerings.

How the Company Makes MoneySnap Inc. primarily generates revenue through digital advertising. The company offers various advertising products, including Snap Ads, which are full-screen vertical video ads, Story Ads, Collection Ads, and Dynamic Ads tailored for direct response marketing. Snap also provides augmented reality (AR) advertising experiences, allowing brands to engage users through interactive AR lenses and filters. Additionally, Snap's Discover feature enables media partners to create content, providing another avenue for advertising. Partnerships with content creators and media companies enhance its content offerings, attracting more users and advertisers to the platform. Snap's advertising revenue model is complemented by its data analysis tools that help advertisers target and measure the impact of their campaigns effectively.

Snap Financial Statement Overview

Summary

Snap shows strong revenue growth and improved cash flow generation, reflecting potential for future stability. However, ongoing unprofitability and high leverage present significant risks that need to be addressed for long-term growth.

Income Statement

Positive

Snap's TTM revenue grew by 16.41% compared to the previous year, indicating strong growth. However, the company remains unprofitable with a negative net profit margin of -12.82% and a negative EBIT margin of -14.68%. The gross profit margin is healthy at 52.42%, showing that the company has a strong core product profitability despite overall losses.

Balance Sheet

Neutral

Snap has a high debt-to-equity ratio of 1.73, indicating significant leverage, which could pose financial risks. The equity ratio of 30.88% suggests a moderate level of stability, but the return on equity is negative at -28.05%, reflecting the overall unprofitability of the company.

Cash Flow

Neutral

Snap's free cash flow showed strong growth of 527.83% from the previous year, reflecting improved cash generation. The operating cash flow to net income ratio is 0.60, indicating positive cash flow relative to losses. However, the company needs to continue improving its cash flow to achieve sustained profitability.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
5.36B	4.61B	4.60B	4.12B	2.51B
	Gross Profit
2.89B	2.49B	2.79B	2.37B	1.32B
	EBIT
-787.29M	-1.40B	-1.40B	-702.07M	-862.07M
	EBITDA
-492.60M	-1.10B	-1.18B	-337.55M	-742.21M
	Net Income Common Stockholders
-697.86M	-1.32B	-1.43B	-487.95M	-944.84M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
3.38B	3.54B	3.94B	3.69B	2.54B
	Total Assets
7.94B	7.97B	8.03B	7.54B	5.02B
	Total Debt
4.24B	4.34B	4.18B	2.63B	2.00B
	Net Debt
3.20B	2.56B	2.75B	637.18M	1.46B
	Total Liabilities
5.49B	5.55B	5.45B	3.75B	2.69B
	Stockholders Equity
2.45B	2.41B	2.58B	3.79B	2.33B
Cash Flow		Free Cash Flow
218.65M	34.79M	55.31M	223.00M	-225.48M
	Operating Cash Flow
413.48M	246.52M	184.61M	292.88M	-167.64M
	Investing Cash Flow
-717.08M	570.95M	-1.06B	90.23M	-729.86M
	Financing Cash Flow
-428.62M	-458.79M	306.71M	1.07B	922.79M

Snap Technical Analysis

Technical Analysis Sentiment

Negative

Last Price7.83

Price Trends

50DMA

9.69

Negative

100DMA

10.57

Negative

200DMA

11.05

Negative

Market Momentum

MACD

-0.31

Negative

RSI

41.62

Neutral

STOCH

31.83

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SNAP, the sentiment is Negative. The current price of 7.83 is below the 20-day moving average (MA) of 8.74, below the 50-day MA of 9.69, and below the 200-day MA of 11.05, indicating a bearish trend. The MACD of -0.31 indicates Negative momentum. The RSI at 41.62 is Neutral, neither overbought nor oversold. The STOCH value of 31.83 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for SNAP.

Snap Risk Analysis

Snap disclosed 65 risk factors in its most recent earnings report. Snap reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Snap Peers Comparison

Overall Rating

UnderperformOutperform

Sector (58)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TME	80 Outperform	$20.91B	21.12	10.75%	1.05%	0.63%	34.09%
PINS	76 Outperform	$19.09B	10.41	47.49%	―	19.35%	―
RDDT	64 Neutral	$20.06B	―	-27.12%	―	61.71%	-442.46%
MTCH	62 Neutral	$7.31B	14.44	-865.98%	0.65%	3.41%	-10.41%
Sector *	58 Neutral	$26.94B	3.15	-10.67%	4.32%	2.14%	-43.11%
SNAP	58 Neutral	$14.96B	―	-28.69%	―	16.40%	48.48%

* Communication Services Sector Average

Performance Comparison

SNAP

Snap

7.83

-3.53

-31.07%

TME

Tencent Music Entertainment Group

12.49

0.84

7.21%

PINS

26.23

-7.79

-22.90%

MTCH

Match Group

28.08

-5.33

-15.95%

RDDT

Reddit Inc Class A

102.01

57.48

129.08%

Snap Earnings Call Summary

Earnings Call Date: Feb 4, 2025 | % Change Since: -32.50% | Next Earnings Date: Apr 29, 2025

Earnings Call Sentiment Positive

Snap Inc. showed strong user growth and revenue improvements with significant advancements in AI and AR. However, challenges in North American brand advertising and some issues with user engagement in the Snapchat redesign were noted.

Highlights

Significant User Growth

Daily active users reached 453 million in Q4 2024, an increase of 39 million year-over-year.

Revenue and Profitability Improvement

Q4 revenue increased 14% year-over-year to $1.56 billion, with $276 million in adjusted EBITDA and $182 million in free cash flow.

Snapchat+ Subscription Growth

Snapchat+ subscribers grew from 7 million to 14 million in 2024, with subscription revenue increasing 131% year-over-year.

Strong Performance in Rest of World and Europe

Rest of World revenue grew 35% year-over-year, and Europe revenue grew 20% year-over-year.

AI and AR Innovation

Significant strides in AI research, including a new AI model capable of generating images quickly and the introduction of the Lens Creator Rewards program.

Lowlights

Weakness in North America Brand Advertising

Brand-oriented advertising revenue was down 1% year-over-year, with continued weakness concentrated among a small group of large clients in North America.

Challenges with Simple Snapchat Rollout

Some users experienced engagement losses, particularly those who preferred the old Stories page layout.

Company Guidance

During Snap Inc.'s fourth quarter 2024 earnings call, the company reported significant progress across various metrics. Daily active users reached 453 million, marking a year-over-year increase of 39 million, while revenue grew by 14% to $1.56 billion. This growth was driven by direct response advertising and the Snapchat+ subscription service, which saw subscribers double to 14 million. The quarter's achievements included $276 million in adjusted EBITDA, a 60% adjusted EBITDA flow-through, $182 million in free cash flow, and a net income of $9 million. For the full year 2024, Snap generated $5.36 billion in revenue, up 16% year-over-year, with $509 million in adjusted EBITDA and $219 million in free cash flow. Looking ahead to 2025, Snap plans to further develop its advertising platform with new ad placements and machine-learning infrastructure while enhancing the Snapchat experience and expanding its augmented reality ecosystem.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.