Assessing Snap’s Valuation After New Shareholder Lawsuit Challenges Advertising Revenue Disclosures

If you’re holding Snap (SNAP) or thinking about jumping in, the latest twist may have you pausing for a closer look. A shareholder class action lawsuit has just been filed, alleging Snap misled investors or withheld important information about how quickly its advertising revenue was really growing. Lawsuits like this can cast a shadow over a company’s financial and reputational standing, which is never something investors take lightly. The lawsuit arrives at a time when Snap’s stock has already experienced some rough patches. Despite a flicker of growth over the past week, shares are down sharply this year and have struggled to regain momentum after larger declines earlier in the year. Add in the fact that Snap’s revenue is up for the year, but net income volatility and ongoing legal distractions remain, and it becomes apparent that the road ahead is not exactly straightforward. With all this swirling around, the real question is whether Snap’s current share price reflects all the risks or if there’s a chance the stock is now trading at a discount to its underlying potential.

Most Popular Narrative: 23.5% Undervalued

According to the community narrative, Snap is currently trading below its calculated fair value. This suggests the potential for significant upside if certain growth assumptions are met.

Accelerating innovation in augmented reality (AR), including the upcoming public launch of Specs AR glasses in 2026 and ongoing expansion of the AR developer ecosystem, positions Snap to benefit from increased user engagement. This also supports the creation of premium advertising and subscription revenue streams, which can boost top-line revenue and improve gross margins over time.

Curious why analysts are so bullish, even as Snap’s profitability remains elusive? This narrative highlights possible major transformations and sets the stage for some ambitious projections on revenue growth, margin potential, and long-term valuation. Interested in what kind of future Snap is pricing in? Read on for the bold assumptions behind this enticing valuation.

Result: Fair Value of $9.28 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent losses and growing competition from social media giants remain significant risks. These factors could threaten Snap’s valuation story.

Find out about the key risks to this Snap narrative.

Another View: SWS DCF Model Tells a Different Story

While valuation based on sales multiples points toward Snap being undervalued, our DCF model takes expected future cash flows into account and presents a different perspective. Does Snap's long-term potential live up to the optimism, or are risks being underestimated?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Snap for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Snap Narrative

If you want to dig deeper or craft your own perspective, building a personalized narrative takes less than three minutes. Do it your way.

A great starting point for your Snap research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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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.

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