Down 94% From Its Record High, Can Snap Stock Snap Back in 2026?

Snap (NYSE: SNAP) is the parent company of social media platform Snapchat, which is popular among younger users, especially those 18 to 24 years of age. Brands normally like building relationships with these users through advertising, but Snap has struggled to capitalize on this opportunity over the last few years.

Snap stock set a record high of around $83 in 2021, but it crashed after Apple introduced a series of new privacy rules that year, which made it harder for app developers to track the activity of their users. As a result, Snap could no longer sell highly targeted ads to businesses, and it has grappled with that challenge ever since.

But Snap hasn't stopped innovating, and its advertising platform is becoming more effective over time. The company delivered solid revenue and adjusted earnings growth last year, so could its stock stage a recovery during 2026?

Image source: Getty Images.

Snap continues to innovate

Businesses typically spend most of their advertising dollars on platforms that deliver the best conversions, so Snap is always looking for new ways to connect brands with their target audience. Last year, the company launched Sponsored Snaps, which enable businesses to reach users in their message inbox. This area of the app usually has very high engagement, because it's where users communicate with their friends.

During the fourth quarter of 2025 (ended Dec. 31), Sponsored Snaps saw click-through rates grow by 7%, and click-through purchases grow by 17% compared to the third quarter, just three months earlier, thanks to a series of format and ranking upgrades. At an individual customer level, Snap said global travel company Contiki achieved a 283% increase in its return on advertising spend by using Sponsored Snaps to drive bookings, so this has become an extremely effective tool.

Snap also launched a suite of tools last year called Smart Campaign Solutions, which uses artificial intelligence (AI) to help businesses with everything from budgeting to audience targeting. It even includes a new tool called Smart Ads, which can autonomously craft an effective ad by identifying the highest-performing content combinations.

But beyond advertising, Snap is also working hard to diversify its revenue streams through subscription products like Snapchat+ and Memories Storage Plans. Snapchat+ gives users early access to new features, and it also allows them to customize their in-app experiences -- all for just $3.99 per month. These subscription services had a combined 24 million members at the end of 2025, which was a whopping 71% increase from the year-ago period.

This number could spell bad news for Snap

Snap generated $5.9 billion in revenue during 2025, which was up 11% from the previous year. Improved ad performance drove a 28% increase in the number of active advertisers on Snapchat in the final quarter of the year, which is also good news for Snap's future revenue.

Snap had a good year at the bottom line, too, with most of its main profitability metrics improving. It still lost $460.5 million on a generally accepted accounting principles (GAAP) basis, but that was down 34% from a $697.9 million loss in 2024. Plus, after excluding one-off and non-cash expenses like stock-based compensation, the company produced $689.5 million in adjusted earnings before interest, tax, depreciation, and amortization (EBITDA), which soared by 36%.

However, one number in Snap's fourth-quarter results might be concerning for investors. Snapchat averaged 474 million daily active users during the period, which was actually down from 477 million in the third quarter three months earlier. It was the first sequential decline since the second quarter of 2018, more than seven years ago.

Management said it was prioritizing profitability, so it spent less money on user acquisition, which contributed to the decline. This will only be a major issue if it becomes a consistent trend, because advertisers want to reach the largest possible audience, so they might be reluctant to spend money on a platform with a shrinking user base.

Snap stock is trading at a rock-bottom valuation

The 94% decline in Snap stock from its 2021 peak, combined with the company's steady revenue growth, has pushed its price-to-sales (P/S) ratio down to just 1.4. That is near the lowest level since the stock went public in 2017.

SNAP PS Ratio data by YCharts

A beaten-down stock isn't always a cheap stock, and investors are right to be nervous about the trajectory of Snap's business considering its relatively modest revenue growth, ongoing GAAP losses, and the recent dip in daily active users. But I also see several positives, including the company's booming subscription business and the improvements in its advertising platform, which are attracting more clients.

As a result, I think Snap's stock could head higher from here, but I wouldn't set my expectations too high for 2026 because it will take time to reverse the severe downtrend. Investors might want to keep their position sizing small while also maintaining a long-term time horizon to maximize their chances of earning a positive return.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.