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Snap Inc. (SNAP), the parent company of Snapchat, has long captured the attention of younger audiences, but not investors chasing profits. Despite its cultural relevance and consistent user growth, the company has struggled to translate popularity into profitability. With mounting pressure from competitors and ongoing ad market challenges, can Snap finally break its losing streak and deliver sustainable profits?
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Snap’s Key Metrics in Q4 2024
According to Main Street Data, Snap’s daily active users (DAUs) reached 453 million in Q4 2024, up from 414 million in the same period last year. However, the year-over-year growth rate has slowed significantly, dropping from 15% in Q1 2023 to just 9% in Q4 2024. This deceleration suggests that while Snap continues to grow its user base, the pace of expansion is slowing, which could pose challenges for future revenue growth and market share.
Moreover, Snap reported an average revenue per user (ARPU) of $9.73 in Q4 2024, in the North American region, a modest increase from $8.96 in Q4 2023.
This rise in ARPU signals the company’s ability to generate more revenue from its existing user base, likely through a higher volume of ads. However, the challenge is ensuring that an increased ad volume doesn’t negatively affect user experience, which could eventually lead to a decline in engagement or user retention.
On the other hand, the company is actively working to reduce its operational expenses—likely by tightening budgets in areas such as staffing, technology, and marketing. As shown in the graph below, Snap’s operating costs have declined significantly as a percentage of revenue in 2024. For example, at the end of Q1 2023, sales and marketing expenses accounted for around 23% of total revenue. By Q4 2024, that figure had dropped to 15.9%, indicating stronger cost efficiency and improved profit potential.
Is Snap Inc. a Good Stock to Buy?
Snap’s figures show a company making meaningful strides toward profitability, including boosting revenue, improving ARPU in key regions like North America, and cutting operational expenses significantly. However, slowing user growth raises questions about long-term momentum. As a result, analysts also maintain a neutral stance on SNAP stock.
According to TipRanks, Wall Street has a Hold consensus rating on SNAP stock, based on 24 Holds, six Buys, and one Sell assigned in the last three months. The average Snap stock price target of $12.15 implies a 52% upside potential.