Does SNAP's Launch of an AI Ad Format Signal a Buy for the Stock?

Snap SNAP is expanding its brand-focused ad offerings with Sponsored AI Lenses, a new ad format powered by generative AI technology. This innovative format places users at the center of the brand experience by generating personalized, AI-driven images that encourage self-expression and social sharing. Brands using Sponsored AI Lenses benefit from increased engagement, which can boost impressions by 25-45% in a single day.Early adopters like Uber and Tinder saw higher-than-average playtimes, showcasing the potential of this format to capture user attention. By combining advanced AI with Snapchat’s core strength in AR and visual communication, Sponsored AI Lenses present a strong opportunity for brands to drive awareness, build loyalty, and stand out in a crowded digital landscape.This move also supports Snap’s broader strategy to strengthen its brand advertising segment. By offering immersive, high-impact formats that appeal to major advertisers, Snap is aiming to improve revenue performance while differentiating itself through AI-led innovation in a highly competitive advertising market.SNAP’s Estimate Revisions Show Steady TrendThe Zacks Consensus Estimate for SNAP’s first-quarter 2025 earnings is currently pegged at 4 cents per share, which remained unchanged over the past 60 days. The estimate indicates year-over-year growth of 33.33%. Snap Inc. Price and Consensus Snap Inc. price-consensus-chart | Snap Inc. QuoteSnap expects first-quarter 2025 revenues in the range of $1.33-$1.36 billion. The consensus mark for revenues is pegged at $1.35 billion, indicating a year-over-year increase of 12.82%.SNAP beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and matched once, with the average surprise being 58.57%.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.SNAP’s Stock Price PerformanceSNAP’s shares have plunged 33.4% in the trailing 12 months, underperforming the Zacks Computer and Technology sector and the S&P 500 index’s decline of 6.4% and 1.4%, respectively. The stock has also underperformed the Zacks Internet - Software industry’s decline of 2.7% in the same time frame.SNAP’s underperformance can be attributed to brand-oriented advertising revenues, which have been on a downward trend. This segment has declined for two consecutive years, mainly due to reduced spending by a small group of large advertisers.The company also faces competition from companies like Meta Platforms META, Alphabet GOOGL and Apple AAPL, which has led to its shares declining. Meta Platforms’ scale and data-driven advertising ecosystem make it a go-to platform for many marketers. Alphabet competes with Snap by offering more targeted, data-rich, and scalable ad solutions across platforms like Google Search and YouTube, while Apple has its own advertising business within the App Store, attracting brands looking for high-intent users in a privacy-focused environment. Shares of Meta Platforms and Alphabet have lost 1.6% and 7.4%, respectively, in the trailing 12 months, while Apple has gained 2.7%.While Snap has seen growth from small businesses and direct response advertisements, its brand advertising business still needs improvement. To address this, Snap introduced an ad format called Sponsored Snaps in October last year, and has now expanded its brand-focused offerings further by integrating AI through Sponsored AI Lenses.SNAP Stock: Buy, Sell or Hold?Snap’s long-term growth prospects remain strong, supported by its continued investments in machine learning, scalable ad formats, and creator engagement. In 2024, the company more than doubled its active advertisers, largely driven by small and medium-sized businesses using Snap Promote. Enhanced ad tools, improved automation, and partnerships with companies like Snowflake and LiveRamp made it faster and easier for the company to continue to benefit from the improved performance. Snapchat+ has also gained significant traction, reaching 14 million subscribers last year. These developments reflect Snap’s broader commitment to innovation and user experience. It has strong long-term growth prospects, driven by its focus on building a more resilient and high-growth business model.SNAP currently carries a Zacks Rank #2 (Buy) and has a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Apple Inc. (AAPL): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis Report Snap Inc. (SNAP): Free Stock Analysis Report Meta Platforms, Inc. (META): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks