Snap stock jumps on upgrade, $500M cost cuts fuel profit hopes

Shares of Snap Inc. rose sharply on Monday, as a combination of an analyst upgrade, restructuring plans, and improving revenue outlook boosted investor sentiment.

The stock jumped as much as 8.39% trading after Rothschild Redburn upgraded Snap to Buy from Neutral and doubled its price target to $10 from $5.

With shares previously trading around $5.65, the new target implies roughly 77% upside.

The upgrade reflects growing confidence in Snap’s financial trajectory, supported by stronger advertising demand, rising subscription revenue, and ongoing cost discipline.

Upgrade highlights improving fundamentals

Rothschild Redburn pointed to several positive developments underpinning its bullish stance, including diversification of revenue streams and improved cost management.

The firm expects Snap’s core business, excluding Spectacles, to have likely reached GAAP breakeven in fiscal 2025, with meaningful profitability projected in 2026.

Analysts also anticipate the company achieving GAAP profitability within the year.

Growth forecasts remain robust.

The firm projects an 11% compound annual growth rate in revenue between 2025 and 2028, driven by a 7% CAGR in advertising and a sharp increase in subscription revenue—from $745 million in 2025 to $1.755 billion in 2028.

Subscription revenue is expected to rise from 13% to 22% of total revenue over that period, while gross margins are forecast to expand from 55% in 2025 to 63% by 2028.

“These included stronger demand for the company's main advertising business, growing subscription revenue, and effective cost management efforts,” the note said.

Restructuring and CFO transition in focus

Snap’s rally also comes as investors react to a broader restructuring effort and leadership changes within the company.

The firm is targeting more than $500 million in annualized savings by the second half of 2026 as part of its cost-cutting initiative.

The plan includes reducing approximately 1,000 jobs, or about 16% of its workforce, and eliminating more than 300 open roles.

Snap is also undergoing a leadership transition, with Doug Hott set to take over finance responsibilities following CFO Derek Andersen’s departure.

Andersen is expected to participate in his final earnings call on May 6 before leaving the company on May 8.

The company has guided for $95 million to $130 million in restructuring charges and outlined a “clear path to net income profitability,” alongside a reduced 2026 expense outlook of $2.75 billion and stock-based compensation of $1.05 billion.

Momentum builds ahead of earnings

Snap’s stock has shown signs of short-term strength, trading above its 20-day moving average, though it remains below longer-term trend indicators.

The shares are still down about 32.7% over the past 12 months, highlighting the uneven nature of its recovery.

Options activity has also picked up, with trading volumes running well above average and calls outpacing puts, suggesting a modestly bullish tone among investors.

Key technical levels remain in focus. Resistance is seen around $6.50, while support lies near $5.00, where dip-buying has previously emerged.

The company is set to report earnings on May 6, with analysts expecting a narrower loss of 7 cents per share on revenue of about $1.53 billion, up from $1.36 billion a year earlier.

Broader analyst sentiment remains mixed, with the stock carrying a Hold rating and an average price target of $7.89.

However, recent upward revisions to earnings estimates and improving fundamentals have added to optimism.

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