Snap Faces Challenges Despite Promising AR Innovations

Snap shares have fallen 22.1% in the last 12 months amid stiff competition. However, with a projected EPS growth of 33.33% and revenue growth expectations of 12.82% in Q1 2025, opportunities in AR innovation could help bolster its performance.

Date: 20-03-2025

AI Rating: 6

Earnings Per Share (EPS): The Zacks Consensus Estimate for Snap's first-quarter 2025 EPS stands at 4 cents, reflecting a 33.33% year-over-year growth. This indicates improving profitability expectations which might attract investor interest as it is typically a positive signal.

Revenue Growth: For the first quarter of 2025, Snap expects revenues to be between $1.33 billion and $1.36 billion, with the consensus at $1.35 billion, indicating a year-over-year increase of 12.82%. This revenue growth is a positive factor, especially considering the competitive pressures.

Despite these encouraging signs, Snap's stock has recently underperformed, dropping 22.1% over the past year compared to sector growth of 6.8%. The company's struggles stem largely from heightened competition from major players such as Meta Platforms and Apple. Meta's success in adapting Snapchat-like features has negatively impacted Snap’s user growth, while Apple's entry into AR advertising poses a significant threat to its dominance in that space.

On the innovation front, Snap continues to focus on AR with advancements such as GPS and GNSS integration for location-based experiences. These innovations could enhance user engagement, leading to potential increases in advertising revenue. Having garnered traction with small and medium-sized advertisers also reflects a diversified advertising strategy that might cushion it against larger competitors’ dominance.

However, challenges persist; slower revenue growth due to diminished upper-funnel demand and a lack of appeal to older demographics may hinder its broader market potential. Despite these headwinds, Snap has shown an ability to outperform expectations in recent quarters, beating the Zacks Consensus Estimate for earnings in three out of the last four quarters.

Stocks: SNAP META AAPL SNOW