Key Points
Snap stock has plummeted 88% from its 2021 peak, partly because of the changes Apple made to its privacy rules that year.
The company is building innovative new technologies to sell targeted advertising slots to businesses on its Snapchat social media platform.
Snap stock is trading at a rock-bottom valuation right now, but there’s one big reason it could stage a recovery.
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Snap (NYSE: SNAP) is the parent company of popular social media platform Snapchat. In September 2021, its stock hit an all-time high of $83, which represented a whopping 388% gain from its initial public offering (IPO) price of $17 from a few years earlier.
However, Snap stock has since lost 88% of its peak value. The company has struggled with the privacy changes implemented by iPhone maker Apple in 2021, which temporarily muted the effectiveness of its advertising platform. Plus, Snap hasn’t expanded as aggressively (organically or through acquisitions) as its main rival, Meta Platforms.
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Snap’s business is showing signs of improvement right now, and there’s one big reason its stock could bounce back from here.
Image source: Getty Images.
Why Snap stock lost momentum after 2021
Most people access social media platforms using their smartphones, and the Apple iPhone has an estimated market share of 57% in the U.S. If you used an iPhone prior to 2021, companies like Snap could automatically track your activity across other apps and websites to find out what you liked and use that information to sell highly targeted advertising slots to businesses. It was like shooting fish in a barrel.
But Apple tightened its privacy rules in 2021, forcing app developers like Snap to ask for their users’ permission before tracking their broader activity. Most people said no, which left social media companies flying blind as they no longer had intricate knowledge of their users’ habits. This made it much harder to sell targeted ads to businesses.
Meta, which owns Facebook and Instagram, adapted quickly because it had a lot of first-party data on its users and the scale to build new technology very quickly. Snap was slower to respond but has made significant progress recently. It developed a new advertising engine powered by machine learning (ML), which targets users more effectively. Brands that ran app-install campaigns on Snapchat during the first quarter of 2025 (ended March 31) saw a 30% increase in conversions on Apple devices, compared to the year-ago period.
Snap is also investing heavily in augmented reality (AR) to help advertisers deliver a unique experience to their target audience. For example, businesses can create “Lenses,” which allow users to try on items of clothing virtually using their smartphone cameras. Snap says this is driving an increase in conversions. In other words, AR-based ads make the target customer far more likely to buy a particular product.
The big reason Snap stock can snap back in 2025
Snap’s annual revenue soared by a whopping 64% in 2021 as Apple’s privacy changes were still in the process of taking effect, but also because people were spending more time online due to the pandemic. But that annual revenue growth rate crashed to 12% in 2022 and less than 1% in 2023.
Some of Snap’s innovations appear to be paying off now, however, because the company’s revenue came in at a record $5.4 billion in 2024, which represented accelerated growth of 16%. Revenue also grew by 14% year over year during the first quarter of 2025 and came in at $1.36 billion, which was the most money the company has ever brought in during the first three months of a year.
There’s clearly momentum building in Snap’s business, and I think it will continue for one critical reason. At the end of the first quarter of 2025, Snapchat had a record 460 million daily active users, which was up 9% year over year. That number continued to grow even during the company’s post-2021 slump, which is a sure sign that users really love the platform.
Image source: Snap.
The primary goal of most marketing campaigns is to reach as many potential customers as possible, so Snapchat will remain a lucrative destination for advertisers, as long as it continues to bring new users in the door. The platform now has around 140 million more daily users than it did at the end of 2021, so if the company continues to improve its advertising technology, it could drive a massive increase in revenue in the coming quarters (and years).
Should you buy Snap stock right now?
Snap stock is trading at a rock-bottom valuation following its 88% decline. Its price-to-sales ratio (P/S) is just 2.8, which is near the cheapest level since it went public in 2017:
SNAP PS Ratio data by YCharts.
If Snap continues to prove that it has solved the challenges with its advertising platform, investors will have more confidence in the company’s ability to deliver faster revenue growth in the future. This might entice them to pay a higher P/S for the stock, which could drive significant upside from here.
There are still many unknowns ahead, so buying Snap stock today might feel like taking a leap of faith. But based on its current valuation and the company’s operating results over the past year, it might be worth adding it to a diversified portfolio — even if it’s only a small position — to keep any potential risk in check.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Meta Platforms. The Motley Fool has a disclosure policy.
