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Snap stock forecast: Will SNAP rebound above IPO price?

By Fitri Wulandari

Edited by Alexandra Pankratyeva


Updated

Snap logo on a smartphone screen
Can SNAP rebound above its IPO price? – Photo: XanderSt / Shutterstock.com

The stock price of Snap (SNAP), the US-based operator of instant messaging application Snapchat, has been spiralling down after two big sell-offs within two months. 

On 23 May 2022, the share crashed 43% to $12.79 a share, after the company revised its revenue and EBITDA targets for 2022 downwards. The second sell-off on 23 July saw the company’s share dived 39% following disappointing second-quarter results.

As of 1 November 2022, the SNAP stock price closed at $9.93 or about 41.6% below its initial public offering (IPO) price of $17. The fall has shrunk the company’s market capitalisation to $16.53bn as of 1 November, down from $131.48bn in September last year, when the stock closed at an all-time high, according to data from Companiesmarketcap.com

SNAP’s founder and CEO, Evan Spiegel, blamed deteriorating macroeconomic headwinds for the company’s gloomy outlook. But the social media company known for the ‘ghost’ logo that represents its vanishing video and messages is facing fierce competition.

ByteDance’s TikTok has surpassed Snap as the favourite social media platform among US teens, according to Piper Sandler’s fall 2022 survey Taking Stock with Teens. Instagram came third.

As the macroeconomic and competition headwinds are likely to stay, what are the chances for SNAP to recover? We look into the latest news, technical analysis and analysts’ views that may affect the Snap stock outlook.

Snap stock analysis: Major price drivers and technical view

Snap, along with its social media peers Meta Platforms’ (FB) Facebook and Instagram, benefited from robust user engagement during the Covid-19 pandemic. Confined at home due to lockdowns, people turned to social media for entertainment and shared messages. 

Snap, which identifies itself as a camera company, surged 206.61%, closing 2020 at $50.07 a share. It continued its strong performance at least until the first seven months of 2021. 

Snap's historical stock price data shows that it surged 23.82% to close at $77.97 on 23 July 2021 after the California-based company reported solid second-quarter performance. 

It posted a 116% year-over-year ( YoY) increase in revenue to $982m in the second quarter of 2021, and Daily Active Users (DAUs) increased by 23% to 293m. However, in the report, the company warned that changes to Apple's (AAPL) iOS operating system could reduce the demand for and pricing of its advertising products. 

The stock traded in a range of $70-$79 a share from the end of July to September 2021, before it hit an all-time high of $83.34 on 24 September. The record high level was short-lived and the stock set to a downtrend. The Snap stock value lost 6.07% during the roller-coaster ride in 2021.

The weak trend followed through 2022, when the stock opened at $47. However, the Snap stock’s market price managed to recoup its losses by surging more than 58% on 4 February 2022 after it reported strong fourth quarter 2021 earnings. 

The company booked revenue of $1.3bn in the fourth quarter last year, a 42% increase on the previous year. It also posted its first quarter of positive income as a public company of $23m.

But the stock could not keep the gains for long. Rising interest rates have prompted investors to dump growth stocks, particularly tech stocks such as SNAP and META, in favour of safe haven assets such as gold

At the time of writing (2 November 2022), the stock has lost 78.4% of its value year-to-date (YTD).  Short-term technical analysis showed bearish consensus sentiment, with the majority of daily, weekly, and monthly indicators suggesting a ‘sell’, according to TradingView.

Snap (SNAP) all-time performance: Technical analysis

Snap stock news: Disappointing 3Q earnings 

On 20 October 2022, Snap reported $1.13bn of revenue in the third quarter of 2022, a 6% increase YoY. However, the company’s net loss jumped 400% to $360m, from $71.96m in the same period 12 months previously.

For earnings per share (EPS), it recorded a loss of $0.22, beating analysts’ estimate of a $0.24 loss, as compiled by TipRanks. The company’s adjusted EBITDA was $72.6m in the third quarter of 2022, shrinking 58% from $174.2m in the same period in 2021. Its free cash flow fell to $18.11m from $51.72m.

“Our revenue growth continued to decelerate in Q3 and continues to be impacted by a number of factors we have noted throughout the past year, including platform policy changes, macroeconomic headwinds, and increased competition,” Snap said in a letter to investors on 20 October 2022.  

Snap’s partners were cutting their marketing budgets amid operating environment headwinds, inflation-driven cost pressures and rising costs of capital, the company said.

Despite a disappointing financial performance, the company’s global Daily Active Users (DAU) increased 19% to 363 million in the third quarter.

Snap did not provide guidance on revenue and EBITDA for the fourth quarter of 2022 due to uncertainties related to the operating environment, the company said.

“While daily average users expanded impressively, monetisation remained difficult. In addition to factors such as macroeconomic uncertainty and Apple’s privacy policies, changes in Snapchat user behaviour are also increasing hesitancy by advertisers. While these changes may also be hindering ad revenue growth for Meta and Alphabet, we believe it is a lesser concern for these firms,” Ali Mogharabi, Morningstar’s senior equity analyst, wrote in a note on 21 October.

Snap price projections: Analyst sentiment

While Snap’s extensive network of users started to attract advertisers, Morningstar’s Mogharabi doubted its ability to monetise users consistently.

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“In turn, we are not yet convinced about the firm’s ability to generate excess returns on capital over the next decade,” wrote Mogharabi.

In addition, Snap was likely to face overwhelming competition from other social media companies, including Meta (Facebook) (META) with its 2.8 billion users, he said.  Meta’s video sharing app Instagram could substitute Snapchat, while ByteDance’s TikTok is another formidable Snap competitor.

“The larger ecosystems of Snap’s competitors may have also created somewhat of an exit barrier for their users, which we think could further limit the growth acceleration of Snapchat users. In addition, growth in new users, user engagement and time spent on Snapchat may face a natural limit in the long run, as customers only have so much time to give to various mobile app interactions each day,” Mogharabi said.

Jefferies raised concerns about Snap’s ability to achieve its revenue growth target after the company announced on 31 August that it planned to reduce 20% of its full time employees globally.  Snap said in its filing that the reduction was part of a broader reorganisation to focus on its priorities, improve cost efficiencies and drive toward profitability and positive free cash flow.

“We worry that SNAP’s reorganisation could lead advertisers to slow or even pause their spending. Given SNAP had been growing headcount over 30% YoY for four straight quarters, we wonder if the company can execute on its lofty growth objectives with a 20% smaller employee base,” said Jefferies’ analysts Brent Thill and James Heaney on 21 October.

Snap stock forecast: Targets for 2022-2025

With all the headwind factors, do analysts view Snap stock a buy, sell or hold?

Jefferies analysts put a ‘buy’ call on SNAP stock but cut its price target to $12 from $17.

Overall, 39 analysts tracked by MarketBeat rated Snap’s share a ‘hold’, with 28 recommending a ‘hold’, 8 for a 'buy' and three recommending a ‘sell.’ They set the Snap stock price target at an average of $14.85, representing a 46.57% potential upside from the last closing price of $10.13 on 2 November. The lowest Snap share price forecast was set at $7 and the highest at $48.

Snap (SNAP) analyst ratings and price targets

As of 2 November 2022, the consensus rating for the stock was a “hold”, based on 28 Wall Street analysts compiled by TipRanks – 19 analysts recommended ‘hold’, two ‘sell’ and seven ‘buy’.

The analysts’ Snap stock price forecast suggested it could average at $10.62 in the next 12 months – a 5.88% increase from the last price. The analysts offered a high price target of $19 and a low-price estimate of $7.

Economic data provider Trading Economics was less optimistic, giving a projected SNAP  stock price of $9.76 by the end of the fourth quarter and $8.85 in one year.

According to Gov Capital ’s Snap stock forecast 2022, the stock could end the year at $14.318. For longer-term Snap stock price prediction, it could climb to $58.374 by the end of 2023 and increase to $105.468 by the end of 2024.

In its Snap stock forecast for 2025, Gov Capital suggested the stock could trade at $169.346 by the end of 2025 and rise to $297.420 by November 2027. The machine learning forecasting service did not provide Snap stock predictions for 2030.

Note that SNAP stock price forecasts provided by analysts or algorithm-based forecasting sites can be wrong. Forecasts shouldn’t be used as a substitute for your own research. 

Always conduct your own due diligence by looking into the latest Snap stock news, technical and fundamental analysis, and analyst commentary. Keep in mind that your decision to trade should be based on your risk tolerance, market expertise, portfolio size, and goals.

Remember that past performance does not guarantee future results, and never trade money that you cannot afford to lose.

FAQs

Is Snap a good stock to buy?

As of 2 November 2022, the Snap share price forecast by Wall Street analysts compiled by MarketBeat and TipRanks recommended a ‘hold’ for the stock. Whether Snap is a suitable asset for you depends on your attitude to risk, your expertise in this market, the spread of your portfolio and how comfortable you feel about losing money. Never invest money that you cannot afford to lose.

Will Snap stock go up or down?

According to analysts’ views compiled by MarketBeat and TipRanks (as of 2 November), Snap’s projected stock price could rise in the short and medium term. Remember that stock markets remain volatile and analysts’ expectations can be wrong. Always conduct your own research.

Will Snap stock recover?

As of 2 November 2022, the consensus Snap stock outlook from analysts was bearish.  According to data compiled by MarketBeat and TipRanks, Snap's stock price may recover, but it would not reach the IPO price of $17. However, bear in mind that analysts’ expectations can be wrong.

Should I invest in Snap stock?

Your decision to invest in SNAP should be based on your risk tolerance, investment objectives, portfolio composition, and experience in the markets. You should do your own research, and never trade money that you cannot afford to lose.

Markets in this article

AAPL
Apple Inc (Extended Hours)
255.01 USD
4.9 +1.960%
META
Meta Platforms Inc (Extended Hours)
588.45 USD
-9.46 -1.580%
Gold
Gold
2623.59 USD
28.77 +1.110%
SNAP
Snap Inc (Extended Hours)
11.42 USD
0.12 +1.070%

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