Down 90% From Its Record High, Can Snap Stock Snap Back in 2025?

Snap's stock, down 90% from its 2021 peak, presents a potential buying opportunity as the company's innovations in advertising technology, AR, and AI begin to yield results; Q1 2025 revenue rose 14% to $1.36 billion, with Snapchat+ subscriptions up 59% year-over-year driving recurring revenue, and adjusted EBITDA soaring 137% to $108.4 million. Snap's machine learning-powered advertising engine is showing improved performance, with brands seeing a 30% increase in conversions from Apple devices, and its price-to-sales ratio is near its historical low, while daily active users reached a record 460 million.

Analysis

Snap Inc. (NYSE: SNAP) has experienced a significant stock price correction, plunging 90% from its 2021 peak, and is now trading near its historical low price-to-sales ratio of 2.5. Despite this, the company is demonstrating positive momentum through innovations in advertising technology, augmented reality (AR), and artificial intelligence (AI). In Q1 2025, Snap reported a 14% year-over-year revenue increase to a record $1.36 billion, driven by improvements in its machine learning-powered advertising engine, which resulted in a 30% increase in conversions from Apple devices for app-install campaigns. Furthermore, its automated bidding system reduced advertiser cost-per-action by an average of 32% while increasing return on ad spend by 16% for early adopters. The Snapchat+ subscription service is also gaining traction, with nearly 15 million subscribers (a 59% YoY increase) contributing $152 million in revenue (up 75% YoY) and representing a $600 million annualized run rate. Snap's daily active users reached a record 460 million in Q1 2025, and the My AI chatbot, powered by Alphabet's Gemini, saw a 55% YoY surge in daily active users. While the company still incurred a GAAP net loss of $139.6 million in Q1, this was a 54% reduction from the prior year, and adjusted EBITDA soared 137% year-over-year to $108.4 million, although this was a decrease from Q4 2024. Operating expenses increased by a modest 2%, indicating careful cost management.

Key Decisions for Investors

• Given Snap's current price-to-sales ratio near historical lows at 2.5 and positive Q1 2025 operational metrics including 14% revenue growth and record daily active users, investors may find the stock presents a compelling valuation for a potential long-term recovery driven by its technological innovations.
• Continued successful execution of its new advertising engine, as evidenced by advertiser adoption and ROI metrics, alongside sustained growth in the Snapchat+ subscription base, are key indicators to monitor for validating the company's turnaround thesis.
• Investors should carefully weigh the improving revenue and adjusted EBITDA figures against Snap's ongoing GAAP net losses and the sequential moderation in adjusted EBITDA from Q4 2024, while also considering the competitive pressures within the digital advertising market.