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On Wednesday, BofA Securities adjusted its outlook on Snap Inc (NYSE: NYSE:SNAP), reducing the price target to $10.00 from the previous $10.50 while keeping a Neutral rating on the company’s shares. The stock, currently trading at $9.09, has shown resilience with a notable 14% gain over the past week. The adjustment comes as the firm’s analyst, Justin Post, noted several ongoing concerns that may impact the social media company’s performance.
Post remarked that while the price-to-sales (P/S) ratio is approaching a historical low, which could support the stock, Snap’s vulnerability in previous economic downturns warrants a cautious stance. According to InvestingPro data, while the company maintains a healthy current ratio of 4.3 and operates with moderate debt levels, it remains unprofitable over the last twelve months. The analyst pointed out three specific areas of concern for Snap: the potential for user growth saturation in key markets such as the United States and Europe, third-party data suggesting a decline in user engagement time, and high stock-based compensation (SBC) expenses coupled with projections of GAAP losses extending through 2027.
Despite these challenges, the current after-hours trading price of $7.80 for Snap’s shares represents a valuation of 2.3 times the projected 2026 P/S, which is close to the historical low of approximately 2 times. Moreover, the valuation stands at 17 times the revised 2026 earnings before interest, taxes, depreciation, and amortization (EBITDA), indicating a premium compared to Snap’s industry peers.
The analyst’s commentary underscores the mixed outlook for Snap, acknowledging the potential for the stock’s valuation to provide a floor while also highlighting structural issues that may hinder near-term growth and profitability. Based on InvestingPro analysis, the stock appears undervalued at current levels, with analysts expecting the company to return to profitability this year. The market’s response to these observations will be closely watched as investors gauge the company’s trajectory in an uncertain macroeconomic environment. For deeper insights into Snap’s valuation and growth prospects, discover 5 additional exclusive ProTips and comprehensive analysis in the Pro Research Report, available on InvestingPro.
In other recent news, Snap Inc. reported its first-quarter 2025 earnings, revealing a narrower-than-expected loss with an EPS of -0.08, compared to a forecast of -0.13. Revenue reached $1.36 billion, surpassing expectations of $1.35 billion, marking a 14% year-over-year increase. Despite these positive results, Snap’s stock fell significantly in after-hours trading. Analysts from Goldman Sachs and Evercore ISI have adjusted their price targets for Snap, with Goldman Sachs reducing it to $8.50 and Evercore ISI to $11, both citing macroeconomic uncertainties and the company’s decision to withhold formal Q2 financial guidance. The company also noted a significant increase in adjusted EBITDA to $108 million from $46 million last year, reflecting improved profitability. Snap’s management highlighted the milestone of reaching 900 million monthly active users and emphasized ongoing strategic initiatives to expand its user base and revenue streams. Despite facing headwinds at the start of the second quarter, Snap remains focused on leveraging augmented reality and direct response advertising to bolster its competitive position. The company has also reduced its 2025 adjusted operating expenses guidance by $50 million, signaling cautious optimism amid broader economic challenges.
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