On Wednesday, BofA Securities maintained its Neutral rating on Snap Inc (NYSE: NYSE:SNAP) shares, with a steady price target of $14.00. The firm's analysts cited several reasons for their stance, including limited user growth in key markets such as the United States and Europe, a slowdown in the growth of Snapchat's subscription service, Snapchat+, and uncertainties regarding the app's ongoing transition.
Additionally, they noted that advertising growth for Snap lags behind that of its industry peers.
The valuation basis has been rolled forward to 2026, with BofA Securities adjusting its revenue estimate for Snap to $6.7 billion and applying a lower price-to-sales multiple of 3.8 times, down from the previous 4.2 times. This change reflects slightly lower growth expectations for the company. Despite this adjustment, the price objective of $14.00 remains unchanged and represents 27 times the firm's revised 2026 EBITDA estimate.
The analysts also mentioned the potential impact of the TikTok ban outcome on Snap's stock price. They believe that the market has only partially factored in the possible effects of this development.
At the current price of approximately $12.50, Snap's stock is trading at 23 times the revised estimated EBITDA for 2026 and 29 times the forecasted free cash flow for the same year, which is considered a premium compared to its industry counterparts.
In summary, BofA Securities' stance on Snap stock is influenced by a mix of growth challenges and market valuation metrics. The firm acknowledges the potential upside from external factors such as the TikTok situation but reiterates a cautious outlook based on fundamental company performance and market comparisons.
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