Snap Inc.

Company: Snap Inc

Ticker: NYSE:SNAP

Sector: Internet Content & Information / Communication Services

Key Narrative: Snap Inc. was once the dominant social media for Gen-Z users’ communication; now it's competing against TikTok and Instagram and seemingly losing, with the company being consistently unprofitable and losing market share.

Snap is a speculative investment. The company does have ambitious long-term goals in places like creator monetization and augmented reality, however, it continues to struggle with profitability, user growth, and monetization efficiency—especially compared to sites like TikTok and Meta, two giants of the market.
Snap is high-risk due to the fact that it is consistently unprofitable, faces big competition in its sector, and has uncertain returns from its long-term investments in augmented reality and other hardware.
Snap Inc. looks more like a lesson in crowd psychology than a disciplined investment. Its share price has swung up and down in the past on hype cycles. While there is potential in Snap with its hold on Gen-Z as one of the leading messaging apps, to bet on Snap would be to bet on beliefs in live tech, AR, and camera-centered shopping, rather than shown progress toward profitability and/or market leadership.

Snapchat is genuinely embedded in Gen-Z; however, its grip is not as firm as it once was. The reason why it's genuinely embedded is because "snapping" is still quite popular, and so is simply messaging on the app. Its filters are also a fun way to express oneself, and of course its privacy and "you had to be there" vibe is still very appealing. However, other social media platforms like Instagram and TikTok have overtaken Snapchat in appeal with their emphasis on short-form content creation. While Snapchat is genuinely embedded in our generation’s lifestyle and its usage is real, it's not loud. It's become the quiet center of Gen-Z communication, while Instagram and TikTok have become the loud center of Gen-Z culture. This also makes Snapchat less profitable because the money ultimately comes from digital advertising, and it's hard to advertise within messaging.
Snap does align with Gen-Z values on privacy and mental health; however, it is a follower, not a leader, on sustainability and ethics and corporate responsibility. While Snapchat does support mental health, there is a lack of commitment to other topics like climate change or ethical sourcing.
Snapchat's demand is real, not manufactured, and this is evident with its streak culture, messaging infrastructure, and low influencer presence. Ultimately, the demand does come from users wanting to stay connected. That does create user retention; however, it doesn't create profitability because ultimately Snapchat doesn’t make profit with messaging.

In terms of growth rate, Snapchat's growth has been volatile and difficult in the past few years. During COVID, Snapchat exploded with ad surges and increased Gen-Z engagement; however, now Snapchat's growth is dependent on small product tweaks, international expansion, and cost-cutting. Snap's growth path currently looks unsustainable. Right now, it looks as if Snapchat is on the defensive, meaning it is more reactive to external factors like Apple's privacy changes and competition from other social media platforms rather than leading the sector it's in.
Snapchat's business model is poor with its thin margins and its big dependence on the digital ad ecosystem, and it struggles to convert scale into sustainable profits. Another big problem is Snap's reliance on high-cost infrastructure and its inability to monetize its platform. Also importantly, Snapchat does lack pricing power in the digital ad market, meaning that the company lacks the ability to set prices for its services at levels that maximize profitability. Meanwhile, companies like Meta and Google do control much of the audience and can maximize their profits. Although Snapchat is growing rapidly, it's ultimately inefficient at creating profits out of revenue. And all of these previously listed factors lead to a situation where Snapchat is burning more capital than it's getting.
Snap also does not have a strong balance sheet, therefore limiting its ability to withstand an economic downturn. This, coupled with Snap's heavy reliance on investor optimism, means that if an economic downturn occurs, Snap may struggle—especially if investor sentiment changes. Also, its high costs in infrastructure and research and development make it even more at risk during a period of financial instability. Essentially, Snap’s balance sheet is more dependent on investor optimism than actually having solid and independent financial health.

Metrics

Metric. Snap Inc. META TikTok
Revenue Growth (YoY). 16% in 2024 21.94% in Q1 2025 42.8% in 2024
Gross Margin 56.9% in 2024 81.7% in 2024 21% in 2024
Price-to-Sales Ratio 4.01 in 2024 9.15 in 2024 Data not available

Snap did grow faster than prior years in 2025 but did so at a smaller rate than Meta or TikTok, showing how increasingly unpopular Snap is becoming compared to those companies. Snap's gross margin, though it improved, still trails Meta by a very wide margin and reflects the high costs. The price-to-sales ratio displays the growing lack of confidence from investors in Snapchat’s ability to monetize its user base. Snapchat was also unprofitable in 2025, as it ultimately lost about $698 million in comparison to its competitors that gained billions. Overall, while Snapchat is growing, it is doing so with persistent losses, thin margins, and a poor business model.

Snap is benefiting from broader macro trends including the shift to digital advertising, the growing creator economy, and the short-form content boom. However, Snap has and currently is struggling too monetize these tailwinds as well as their competitors have. This is most likely due to their smaller scale and weaker data infrastructure.
Snapchat does have a moat, though it is a little smaller than a number of their competitors. Its biggest advantage is that it has a highly engaged Gen-Z user base and a number of features like its ephemeral chats and images, its private communication, and its augmented reality development. The issue is that a lot of these features are being replicated by competitors, like Instagram Stories and TikTok effects, for example. Snap’s only moat is essentially its cultural relevance in the messaging world and its product innovation listed prior. The issue is that without strong monetization, Snap is vulnerable to companies with more money like Meta and TikTok.
Snap currently has strong brand stickiness to Gen-Z. It is probably one of the most used platforms of the generation, with some of its features like chats, snaps, and stories being ingrained in our generation’s daily routines. And unlike other social media platforms, which are more performative, Snap has become essentially a messaging app, which has created habitual use and strong loyalty. However, this loyalty and popularity haven't resulted in much monetization. Snap's long-term relevance will depend on whether it can come up with innovative ideas that appeal to youth culture and actually generate revenue from these ideas—something it has struggled to do in the past.

Snap is currently more hype than fundamentals. While the company does have a strong cultural connection and a loyal Gen-Z user base, its valuation isn’t supported by its continuous unprofitability. Snap posted significant losses in 2024 ($698 million), and though its gross margins have improved, they are far behind its biggest competitor, Meta. Its price-to-sales ratio being 4.1 does suggest there is some investor optimism, but it's not close to higher-growth stocks, meaning that investors are skeptical that Snap can become profitable and efficient. Snap currently seems to be trading more on hope of improvement rather than showing actual financial results.
Over the last year, there has been a lot of significant insider selling at Snap Inc. Executives—CEO Evan Spiegel, CTO Robert Murphy, CFO Derek Andersen, and General Counsel Michael J. O'Sullivan—have all sold millions in shares. This pattern of insider selling may display a lack of confidence in the company’s future.

Snap currently looks like a speculative momentum play at the moment—unless you think that they can actually monetize their innovation, which I don't think they can. On the flipside, Snap is a very risky investment because currently they have a very poor business model with very thin margins, big infrastructure and research and development spending, and ultimately can't make money. So essentially, they spend too much and make far too little. Betting on Snap, especially due to those reasons listed above, is highly risky.
From a disciplined investment strategy standpoint, this stock fits into the high-risk portion of a broad portfolio. The stock does have potential with its innovation and loyal user base; however, that’s offset by its current state: limited pricing power, losses, and insider selling. A smart investor would only buy Snap if they can tolerate loss and believe in its long-term upside. Snap ultimately isn't a stock to rely on.
Personally, I wouldn’t invest in Snapchat—mainly due to the fact that the current fundamentals don’t quite support a long-term position.
Lastly, A catalyst to watch out for is Snap's Q2 2025 report, which could provide further insights into Snap’s financial trajectory.