Should you sell your Snap stock?

Roth Capital Markets analyst Rohit Kulkarni reiterated a “Neutral” rating on Snap (Snap Stock Quote, Chart, News, Analysts, Financials NYSE:SNAP) and cut his 12-month price target to $7.00 from $10.00 following what he characterized as an in-line fourth quarter and an “uninspiring” first-quarter outlook.

In a Feb. 5 sales analysis, Kulkarni said Snap is “doing everything except winning,” noting that while the company has built a more diversified revenue base spanning advertising, subscriptions and hardware, core ad growth has failed to reaccelerate over the past year and recent user trends have weakened.

Snap shares were up about 3% in after-hours trading, but Kulkarni said sentiment remains constrained by delayed implementation of the Perplexity partnership, social-media age-restriction impacts and ongoing softness among large North American advertisers.

“We admire that SNAP now has a diversified revenue base, including ads, subscriptions, and hardware, plus there are ad-tech and AI glasses catalysts ahead,” Kulkarni said. “However, at around $6, shares are trading near a five-year low as core ads growth hasn’t improved over the past 12 months, recent user trends have been negative, and Perplexity deal implementation has been delayed.”

Kulkarni said subscription growth, moderating CPM declines and tighter cost control in the fourth quarter offer a path for Snap to show relative improvement in 2026, but he remains cautious on the near-term setup. As a downside valuation exercise, he said Snap could generate at least $6.5-billion in revenue and $600-million in free cash flow in 2027, which at 15 times EV/FCF would imply a share price closer to $5.

From the earnings call, Kulkarni highlighted improving performance in several ad products, including Sponsored Snaps and Dynamic Product Ads, as well as continued momentum from SMB advertisers, which drove the majority of ad revenue growth for a sixth straight quarter. Subscription momentum also remained strong, with the subscriber base reaching 24 million in the fourth quarter, up 71% year over year, supporting gross margins of 59% and management’s goal to exceed 60% in 2026. Snap also authorized a new $500-million share repurchase program and reported Adjusted EBITDA ahead of expectations.

Offsetting those positives, Kulkarni pointed to the exclusion of any Perplexity contribution from first-quarter guidance, declining DAUs in North America and Europe, and persistent challenges in re-engaging large brand advertisers amid regulatory and platform-driven age-verification changes.

Following estimate revisions, Kulkarni said Snap is now expected to generate $979.8-million in Adjusted EBITDA on $6.60-billion in revenue in fiscal 2026, down from prior forecasts. He said those figures should improve to $1.09-billion in Adjusted EBITDA on $7.11-billion in revenue in fiscal 2027, though both years were revised lower from previous estimates.

-30-