Snap SNAP shares have plunged 22.1% in the trailing 12 months, underperforming the Zacks Computer and Technology sector’s appreciation of 6.8% and the Zacks Internet - Software industry’s return of 7.3%.

SNAP shares’ underperformance can be attributed to tough competition from the likes of giants, such as Meta Platforms’ META Facebook and Apple AAPL. Facebook’s strategy of mimicking Snapchat features on its platforms to boost user growth and engagement levels has paid off. The company even succeeded in making them more popular than Snapchat. Competition from Apple poses a serious threat as it is preparing to enter the Augmented Reality (AR) advertising business where Snap is a dominant name. 

Despite these competitive pressures, Snap continues to double down on its strength in AR. The company has been making significant strides in AR innovation, with recent developments now featuring GPS, GNSS and compass integration, which will allow developers to create location-based AR experiences. New applications include NavigatAR for navigation, Path Pioneer for guided walking courses, and Peridot Beyond for multiplayer interactions, expanding the potential for both outdoor and interactive AR content.

Snap has also introduced Leaderboards, an AR keyboard, enhanced hand tracking, and improved Lens sharing, making AR experiences more interactive and accessible. These features could drive higher user engagement and monetization, potentially boosting advertising revenues.

The Zacks Consensus Estimate for SNAP’s first-quarter 2025 earnings is currently pegged at 4 cents per share, which remained unchanged over the past 30 days. The estimate indicates year-over-year growth of 33.33%. 

Snap expects first-quarter 2025 revenues in the range of $1.33-$1.36 billion. The consensus mark for revenues is pegged at $1.35 billion, indicating a year-over-year increase of 12.82%.

SNAP beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and matched once, with the average surprise being 58.57%.

Price and Consensus

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What Should Investors Do With SNAP Stock?

Snap has been experiencing slow revenue growth in North America because of weaker upper-funnel demand from large clients. Brand-oriented advertising revenues have also been on a downward trend, which is driven by the same reason. Additionally, the company’s sole focus on the younger demographic and failure to attract the older generation has been a major headwind. The stiff competition from Facebook and Apple has also impacted Snap negatively.

However, SNAP’s long-term prospects remain strong due to its continued investments and innovations in AR, and despite facing weak demand from large advertisers, the company has benefited from a growing number of small and medium-sized advertisers, who have been the biggest contributor to SNAP’s advertising revenues in 2024. The company has acquired integration partners like Snowflake SNOW, Datahash and LiveRamp, which makes it faster and easier for it to continue to benefit from the improved performance.

SNAP currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a more favorable entry point in 2025. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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