Thinking about what to do with Snap stock right now? You are definitely not alone. With shares having taken investors on a wild ride lately, it is only natural to wonder whether this is a moment to jump in, hold tight, or step to the sidelines. Over the past week, the stock dropped a sharp 8.9%, but if you zoom out just a bit, you will notice a 6% gain over the last month. Go back a year, though, and the picture gets tougher. Snap is down more than 30% year-to-date and around 30% over the last twelve months. Even longer-term holders have felt the pain, sitting on a 72% loss over the past five years.
It is fair to say that recent news flow has not exactly helped sentiment. With New York City filing legal action against major social media platforms, including Snap, fears around regulatory pressure and its potential impact on engagement have resurfaced. At the same time, developments in the competitive landscape, like TikTok’s reported shake-up and reduced valuation in the U.S., have introduced new questions about long-term user trends and monetization opportunities within social media.
Despite these headwinds, some signals suggest that Snap might be worth a closer look for a value-oriented investor. The company currently scores a 4 out of 6 on our proprietary valuation checks, meaning it is undervalued in four key respects. But what exactly goes into a valuation score? And does it tell the whole story? Let’s dive in to the classic approaches to valuation first, before exploring what could be a more insightful way to think about Snap’s true worth.
Why Snap is lagging behind its peers
The Discounted Cash Flow (DCF) model projects a company’s future free cash flows and discounts them back to today’s value, providing an estimate of what the stock should be worth based on expected cash generation. For Snap, this method uses two stages of projected cash flows, factoring in analyst estimates for the near-term and extrapolations for later years.
Currently, Snap’s free cash flow sits at about $365 million. Analyst forecasts project impressive growth, anticipating free cash flow to reach over $1.4 billion by 2029. Further projections, extended by Simply Wall St, point to even higher numbers through 2035. These assumptions reflect expectations that Snap will expand monetization and optimize its cost base in the coming years.
Based on these forecasts, Snap’s intrinsic value is estimated at $18.96 per share. Compared with recent share prices, this suggests the stock is trading at a 59.0 percent discount to its intrinsic value. This may indicate that the market is overly pessimistic about Snap’s long-term prospects.
Story Continues
Result: UNDERVALUED
SNAP Discounted Cash Flow as at Oct 2025
Our Discounted Cash Flow (DCF) analysis suggests Snap is undervalued by 59.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
For companies like Snap, which are not consistently profitable on a net income basis, the Price-to-Sales (P/S) ratio is a more suitable valuation metric than Price-to-Earnings. This approach focuses on how the market values a company’s revenues rather than earnings, which can be distorted by short-term costs or accounting treatments. It is especially useful for high-growth or technology companies that are reinvesting heavily in their business.
Growth expectations and perceived business risk both play a major role in shaping what is considered a “normal” or “fair” P/S ratio. Companies expected to grow quickly or with robust market positions often warrant a higher multiple. On the other hand, riskier or slower-growth peers command lower ratios.
As of now, Snap trades at a P/S ratio of 2.3x. For comparison, the average among its peers is 3.1x, while the Interactive Media and Services industry averages stand at 1.3x. This places Snap below the peer group but above the sector benchmark. However, these comparisons are only a starting point because they do not account for company-specific factors like growth, profitability, or risk profile.
Simply Wall St’s proprietary “Fair Ratio” for Snap, which considers its growth outlook, margins, industry dynamics, and company size, is calculated at 2.7x. This tailored benchmark offers more insight than a simple peer or sector average since it adjusts for the nuances that drive Snap’s underlying valuation.
Since Snap’s current P/S is 2.3x while its Fair Ratio is 2.7x, the valuation appears somewhat conservative. This suggests that Snap shares are trading below what would typically be justified for a company with its characteristics.
Result: UNDERVALUED
NYSE:SNAP PS Ratio as at Oct 2025
PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a simple but powerful tool: it is your story about a company, connecting your assumptions about its future revenue, earnings, and margins to a fair value estimate. Instead of just crunching numbers, Narratives help you factor in the “why” behind your outlook, linking your perspective on Snap’s future to your actual forecasts and the price you believe is justified.
Narratives are easy to use on Simply Wall St’s Community page, where millions of investors are already building and sharing their views. They make investment decisions more actionable by showing when to buy or sell Snap stock. You can simply compare your Narrative’s Fair Value to today’s share price. In addition, Narratives automatically update as soon as new information, such as earnings results or company news, becomes available so your thesis is always current.
For example, some Snap Narratives might forecast robust AR-driven growth and improving margins, supporting a high fair value above $16.00. Others might cite stiff competition and regulatory risks, pegging fair value as low as $7.00. With Narratives, you can see, understand, and even build your own story in minutes.
Do you think there’s more to the story for Snap? Create your own Narrative to let the Community know!
NYSE:SNAP Community Fair Values as at Oct 2025
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include SNAP.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com