Snapchat: A Value Play with Growth Upside About to SNAP?

I like beaten-down stocks. They often trade at a discount when compared to their intrinsic value. Of course, this needs to be backed by prospects of growth and a path to profitability.

I think $NYSE: SNAP gives us this. The stock is donw 88% since its all-time high in 2021. At the same time, the number of users (DAU) is growing, and margins are improving and the business metrics are telling me that this stock has a good risk/reward profile.

Currently, SNAP reminds of META in 2021/22 when the stock price dropped over 70%, to later recover by 600%.

The forward PE is at 10, and the PS ratio is at 2.1, which, when compared to competitors like META, represents a good discount.

Here's my fundamental analysis. 🥂

THE GOOD:

• The number of users (DAU and MAU) continues to grow. Q2 2025 saw MAUs hit 932 million (up 7% YoY) and DAUs 469 million, with time spent up 23%.
  
• Ads remain ~87% of revenue ($5.36 billion full-year 2024, up 16% YoY—the fastest since 2021), but AI tools like 7/0 Optimization (performance-based bidding) and Sponsored Snaps (20-30% higher conversions) doubled active advertisers in 2024. In addition, user subscriptions are also growing fast.
  
• AR lenses (8 billion daily uses, up 20% YoY) boost e-commerce conversions 30%, positioning Snap for the $100 billion+ AR market by 2030.
  
• Adjusted EBITDA flipped positive at $41 million, with free cash flow at $24 million quarterly ($392 million TTM).
  
• Cash hoard: $2.89 billion, providing 2+ years' runway without dilution.
  
• Trading at 2.11x TTM sales (vs. S&P 500's 3.1x and peers like Pinterest at 5x), SNAP embeds deep pessimism.
  
• Analysts' median price target is at $9, providing some safety margin.
  

THE BAD

• Despite user growth, monetization lags: Global ARPU stagnated at $2.87 in Q2 2025 (vs. Meta's $11.89).
  
• Snap's growth slowed to 9% in Q2 (the slowest in a year), with Q3 guidance at 10-12% ($1.475-1.505 billion).
  
• Debt-to-equity at 202.57% (2.03x) raises leverage risks.
  
• Instagram/TikTok copy features (e.g., Stories, Reels), eroding Snapchat uniqueness.
  

MOVING FORWARD
Snapchat continues to make strong investments in R&D and its AI capabilities.
User premium subscriptions are growing very significantly, and they might cross $1 billion 2026 in recurring revenue.

TECHNICAL ANALYSIS
There's a strong resistance at the $7 level. This level has been acting as a resistance since 2022.

WHAT I'M DOING
I'm allocating around 0.5% of my portfolio to SNAP. Going to move with caution, considering this stock is quite volatile and there are still many uncertainties. I might DCA in case the price drops while the fundamentals are good.

Quick note: I'm just sharing my journey - not financial advice! 😊