Snap Inc. Shows Signs of Recovery Amid Market Pessimism

Los Angeles, CA – Snap Inc., the parent company of Snapchat, traded at $9.88 on July 21, as evident in a recent analysis by Antonio Linares through his Substack. Despite facing over an 87% decline since its peak in late 2021, some experts suggest that the company presents a valuable investment opportunity.

Snap’s daily active users surged from approximately 375 million in the fourth quarter of 2022 to 460 million in the first quarter of 2025. This growth positions Snapchat among the leading social media applications with nearly 900 million monthly active users.

However, revenue per daily active user has seen a slight decline, going from $12.20 to $12.02. This drop is attributed to expansion efforts into emerging markets, which typically generate lower average revenue per user. Nonetheless, monetization strategies, particularly the subscription service Snapchat+, have gained traction, reflecting a 75% increase in revenues year-on-year, amounting to a $600 million annual run rate by the first quarter of 2025.

Free cash flow per share has been on the rise since early 2024, driven by operational efficiency and better advertising effectiveness. Notably, the total number of advertisers using Snapchat increased by 60% year-over-year, aided by initiatives such as Snap Promote and the expansion of direct-response advertising.

In addition to these developments, Snap has introduced ‘My AI’, an AI-powered in-app assistant that rapidly gained over 200 million users shortly after its launch. This innovation adds to Snap’s unique identity, focusing on connecting real-world friends—contrasting with competitors like Meta.

While the company’s total debt has surpassed its cash since 2022, Snap’s growing operating cash flow alleviates potential balance sheet risks. Analysts note Snap’s current trading price of just 2.7 times its sales, which is markedly lower than peers like Spotify, valued at nine times sales despite similar market dynamics.

Continuing effective execution on revenue per user, especially through subscriptions and AR commerce, could yield substantial gains for the company. Pessimism in the market may provide a strategic opportunity for investors.

As of the end of the first quarter, 39 hedge fund portfolios had holdings in Snap, down from 44 in the previous quarter. While some experts recognize the potential risks of investing in Snap, others argue that certain AI stocks may offer even higher returns in the short term.