Snap (NYSE: SNAP) recently published its Q1 results, with revenue slightly exceeding street expectations, while earnings fell notably short. The company reported revenue of $1.36 billion and an adjusted loss of $0.08 per share, compared to consensus estimates of $1.35 billion and an anticipated profit of $0.04, respectively. Nonetheless, the company did not offer any outlook due to uncertainties surrounding how the current trade policies under the Trump administration will affect Snap’s advertising revenue. This disappointing earnings miss and lack of guidance were disappointing to investors, resulting in a 15% drop in the stock following the earnings announcement.
SNAP stock, registering -19% returns since the start of the year (as of April 29th, 2025), has underperformed compared to the S&P 500 index, which is down 5%. The stock has historically shown volatility around its earnings period, as detailed in the Snap Earnings Preview. For those seeking more stable gains than an individual stock, consider the High Quality portfolio, which has outperformed the S&P and achieved over 91% returns since inception.
Snapchat’s first-quarter performance in 2025 showcased notable growth in key areas. Snap’s revenue reached $1.36 billion, representing a 14% year-over-year increase, mainly driven by strong growth in its paid subscriber base. Specifically, Snapchat+ increased its membership to 15 million, up from 14 million in the previous quarter. This subscriber growth resulted in a 4.6% year-over-year rise in average revenue per user (ARPU), which amounted to $2.96. Additionally, daily active users (DAU) also grew, reaching 460 million, a 9% increase compared to the same period last year.
This favorable operational performance translated into a significant enhancement in profitability, with Snap’s adjusted EBITDA margin doubling to 8% in Q1 2025. Despite this progress, the company still recorded a net loss of $0.08 per share. However, this reflects a considerable reduction in the loss compared to the $0.19 per share loss reported in the first quarter of the prior year.
Despite the positive financial and operational outcomes, SNAP’s stock price is presently declining following the earnings report. This downturn appears to be primarily due to two factors: the company’s failure to meet earnings expectations and the lack of future financial guidance.
Looking beyond the immediate reaction, the stock’s performance over the last few years has demonstrated considerable volatility, with annual returns proving significantly less stable compared to the broader S&P 500 index.
In contrast, the Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, is substantially less volatile. Moreover, it has comfortably outperformed the S&P 500 over the last four years. What is the reason for this? As a collection, HQ Portfolio stocks have provided superior returns with lower risk compared to the benchmark index; less jagged fluctuations, as can be seen in the HQ Portfolio performance metrics.
In light of the existing uncertainty in the macroeconomic climate, especially regarding tariffs and trade disputes, a question arises about whether SNAP may encounter a similar period of underperformance compared to the S&P 500 in the upcoming year, akin to what occurred in 2021, 2022, and 2024. Alternatively, might the company be on the verge of recovery?
While we are in the process of revising our valuation model for SNAP to reflect the latest quarterly outcomes, our current evaluation indicates that the stock is still undervalued. Trading at approximately $8, SNAP’s stock currently boasts a price-to-sales ratio of 2.4x based on trailing revenues, which is significantly lower than its three-year average price-to-sales ratio of 4.1x.
While SNAP stock appears to be undervalued, it is beneficial to review how Snapchat’s Peers are performing on relevant metrics. You can find additional valuable comparisons for companies across various sectors at Peer Comparisons.