Snap’s stock (NYSE:SNAP) rose 7% on Friday, June 27, following comments from a research institution regarding advancements in Snap’s direct response advertising. This favorable news might enable Snap to surpass the consensus earnings estimate for the ongoing quarter. Nevertheless, despite this recent increase, SNAP’s stock remains down 20% year-to-date. However, we think SNAP stock, which is currently valued at around $9, offers a good buying opportunity. While there are certain concerns, its moderate valuation seems to have already accounted for these risks, indicating potential for further growth.
Our findings are based on a thorough evaluation of Snap’s financial health and operational performance. We analyzed its current valuation in relation to its operating performance over recent years, as well as its historical and current financial situation. Our in-depth assessment, concentrating on Growth, Profitability, Financial Stability, and Downturn Resilience, suggests that Snap exhibits moderate operating performance and financial health. That being said, if you are looking for upside with less volatility compared to individual stocks, the Trefis High Quality portfolio offers an alternative — having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately, see – QuantumScape: 40x Upside For QS Stock?
How Does Snap’s Valuation Look vs. The S&P 500?
When considering the cost per dollar of sales or profit, SNAP stock appears inexpensive compared to the overall market.
- Snap has a price-to-sales (P/S) ratio of 2.6 compared to a figure of 3.1 for the S&P 500
How Have Snap’s Revenues Grown Over Recent Years?
Snap’s Revenues have experienced significant growth in recent years.
- Snap’s top line has increased at an average rate of 9.4% over the past 3 years (compared to an increase of 5.5% for the S&P 500)
- Its revenues have risen 16.4% from $4.6 Bil to $5.4 Bil in the last 12 months (against a growth of 5.5% for the S&P 500)
- Moreover, its quarterly revenues increased 14.4% to $1.6 Bil in the latest quarter from $1.4 Bil a year prior (compared to a 4.8% rise for the S&P 500)
How Profitable Is Snap?
Snap’s profit margins are significantly lower than those of most companies in the Trefis coverage universe.
- Snap’s Operating Income over the last four quarters was $-787 Mil, representing a very poor Operating Margin of -14.7%
- Snap’s Operating Cash Flow (OCF) over this time was $413 Mil, indicating a poor OCF Margin of 7.7% (compared to 14.9% for the S&P 500)
- For the last four quarters, Snap’s Net Income was $-698 Mil — demonstrating a very poor Net Income Margin of -13.0% (as opposed to 11.6% for the S&P 500)
Does Snap Look Financially Stable?
Snap’s balance sheet seems robust.
- Snap’s debt was $4.2 Bil at the end of the most recent quarter, while its market capitalization stands at $15 Bil (as of 6/29/2025). This results in a moderate Debt-to-Equity Ratio of 30.0% (versus 19.4% for the S&P 500). [Note: A low Debt-to-Equity Ratio is favorable]
- Cash (plus cash equivalents) accounts for $3.2 billion of the $7.6 billion in Total Assets for Snap. This results in a very strong Cash-to-Assets Ratio of 42.5%
How Resilient Is SNAP Stock During A Downturn?
SNAP stock has performed worse than the benchmark S&P 500 index during certain recent downturns. While investors are hopeful for a soft landing for the U.S. economy, what might happen if another recession occurs? Our dashboard How Low Can Stocks Go During A Market Crash illustrates how key stocks performed during and after the last six market crashes.
Inflation Shock (2022)
- SNAP stock decreased 90.7% from a high of $83.11 on 24 September 2021 to $7.76 on 21 October 2022, compared to a peak-to-trough decline of 25.4% for the S&P 500
- The stock is still struggling to recover to its pre-crisis high
- The highest the stock has achieved since then is 17.45 on 6 February 2024 and currently trades around $8.70
COVID-19 Pandemic (2020)
- SNAP stock dropped 56.5% from a high of $19.25 on 23 January 2020 to $8.37 on 18 March 2020, while the peak-to-trough decline for the S&P 500 was 33.9%
- The stock completely returned to its pre-crisis peak by 1 June 2020
Putting All The Pieces Together: What It Means For SNAP Stock
In conclusion, Snap’s performance across the mentioned parameters can be summarized as follows:
- Growth: Very Strong
- Profitability: Extremely Weak
- Financial Stability: Very Strong
- Downturn Resilience: Very Weak
- Overall: Neutral
The company has shown moderate performance across critical financial metrics, which is mirrored in its current valuation. We expect an expansion of its valuation multiple from current levels, particularly in light of the recent acceleration in revenue growth alongside subscriber growth and the anticipated improvement in profitability driven by positive advertising trends.
While it would likely be beneficial to acquire SNAP stock now, you may also consider the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (a combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices), yielding strong returns for investors. What accounts for this? The quarterly rebalanced mixture of large-, mid-, and small-cap RV Portfolio stocks provided a flexible approach to capitalize on favorable market conditions while minimizing losses when markets decline, as outlined in RV Portfolio performance metrics.