Our target price of $8.50 is based on ~21x our 2026E EV/EBITDA whereby our EV is ~$15 billion and our 2026E EBITDA is $701 million. Our valuation multiple adjusts for reduced visibility across Snap's advertising demand, partially offset by ramping benefits from its rebuilt DR ad platform and subscription revenues. We note our $8.50 target price also implies ~2x our 2026E EV/Revenue.

This stock is High Risk based upon our quantitative model.

Downside risks to our target price are: 1) greater IDFA impact than anticipated; 2) Competition across the social networking market with TikTok, Instagram, and Facebook; 3) recessionary risks driven by a macro slowdown; and 4) supply chain disruptions reducing overall ad spend.

We see the primary upside risks to our target price as: 1) faster-than-expected re-opening in the U.S.; 2) better monetization improvement trends; and 3) continued strength in DAU growth.