Snap Inc. (SNAP) reported a strong Q4 performance, with revenue and EBITDA surpassing Street expectations at $1,557 million and $276 million, respectively. This was driven by a 14% growth in direct response ad revenues and a 130% y/y increase in Snapchat+ subscriptions. Despite these gains, BofA maintains a "Neutral" rating, citing concerns over slower user and revenue growth compared to peers and a premium EBITDA valuation.
The report highlights Snap's Q1 revenue guidance of $1,325-$1,360 million, which brackets Street expectations, though EBITDA guidance of $40-$75 million falls short. Management is optimistic about expanding Sponsored Snaps and Promoted Places, which could drive inventory growth in high-value markets. However, user growth remains limited in key US and EU markets, and rising expenses, including stock-based compensation, could hinder significant EBITDA upside.
BofA has raised its 2025 revenue estimate by 3% to $6.1 billion and EBITDA by 13% to $789 million, reflecting higher ad growth and Snapchat+ traction. The price objective has been increased to $14.50 from $14, based on slightly higher 2026 revenues of $7.0 billion and an unchanged 3.8x revenue multiple. "We are encouraged by Snap's results... However, user growth remains limited in high-value US/EU markets," notes BofA.
Snap's stock was trading at $11.23, down 3.19% on February 5.