U.S. social media stocks Meta Platforms (META), Snap (SNAP), and Pinterest (PIN) have been in focus since the proposed ban on Chinese rival TikTok was announced. While President Donald Trump has delayed the ban on TikTok for the time being, if the Chinese app gets banned ultimately, it would boost the prospects of the U.S. social media stocks. Keeping the TikTok uncertainty aside, Wall Street remains cautious about Snap stock following a nearly 30% decline over the past year amid concerns over profitability, decelerating user growth, and intense competition.
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Analysts Maintain a Cautious Stance on SNAP Stock
Earlier this month, BofA Securities analyst Naved Khan reiterated a Hold rating on SNAP stock with a price target of $14. The analyst stated that he maintained his price target based on the revised 2026 revenue estimate of $6.7 billion and a lower Price-to-Sales (P/S) multiple of 3.8x compared to the previous multiple of 4.2x, given expectations for slightly lower growth.
Khan remains on the sidelines on the stock due to limited user growth in high value markets like the U.S. and European Union, slowing Snapchat+ subscription growth, and ad growth that lags peers.
Meanwhile, BMO Capital analyst Brian Pitz cut his price target for SNAP stock to $16 from $18 and reiterated a Buy rating. Pitz contends that competition for Snap “remains intense,” mainly from Instagram, YouTube, and TikTok, which made him lower his estimates. Moreover, BMO’s channel checks indicate that the company’s advertising spending growth continues to be modest. That said, Pitz added that the advertiser adoption for Sponsored Snaps is gaining momentum, building a favorable setup for 2025. While he is bullish on Snap due to the upside potential in the platform’s monetization, he cautioned investors that management execution continues to be a risk.
Expectations from Snap’s Q4 Results
Snap is scheduled to announce its Q4 2024 earnings on February 4, 2025. Wall Street expects the company’s loss per share to come down to $0.04 from $0.15 in the prior-year quarter.
In October 2024, the company delivered better-than-expected Q3 2024 results, but its Q4 revenue guidance fell short of expectations. Nonetheless, the company is optimistic about the road ahead and believes that its investments in AI (artificial intelligence) and AR (augmented reality) will support innovation across its advertising platform, supporting its long-term growth opportunity.
Is SNAP a Good Stock to Buy?
Overall, Wall Street is sidelined on Snap stock, with a Hold consensus rating based on seven Buys, 19 Holds, and one Sell rating. The average SNAP stock price target of $13.67 implies about 26% upside potential.
