Stifel upgrades Snap as sharp selloff balances risk despite user, ad concerns

Investing.com -- Stifel upgraded Snap to “Hold” from a more cautious stance, saying the stock’s steep decline this year has largely priced in concerns around slowing user growth, weak advertising momentum and uncertainty over a potential AI partnership.

Shares have fallen about 37% year to date and 33% since late January, prompting the firm to view the risk-reward profile as more balanced at current levels. Stifel kept its $5.50 price target.

The brokerage said its earlier downgrade had been driven by a shrinking North America user base, underused monetization opportunities and ad tools that lag peers, which limited the platform’s ability to capture marketing budgets. Those issues persist, but the recent drop in the stock reflects much of that pressure.

Recent company updates have reinforced the shift in sentiment. Snap reported a sequential decline of 3 million global daily active users in the fourth quarter, including a 4 million drop in North America. Management also said it is reducing spending on community growth marketing, which is expected to weigh on engagement in the near term.

Advertising growth remains muted, and the outlook for a proposed deal with AI firm Perplexity remains unclear. Snap previously said Perplexity would pay about $400 million for a one-year placement in the app, but the companies have not yet agreed on a broader rollout. As a result, the potential revenue contribution was not included in guidance.

Stifel said a finalized agreement could improve sentiment and add incremental revenue back into forecasts. The firm also pointed to growth in Snap’s subscription business, which reached 24 million subscribers after strong net additions in the fourth quarter, as a potential offset to advertising headwinds.

At current levels, Stifel said the stock trades at roughly 1.4 times next-twelve-month sales, well below its historical average, suggesting valuation has reset after the selloff.

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