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Will Snap’s (SNAP) Debt-Funded Buyback Shift Its Capital Allocation Story?

Simply Wall St·08/13/2025 06:28:58
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  • Snap Inc. recently completed the pricing of a US$550 million senior unsecured notes offering due 2034 in a private transaction, with proceeds earmarked for the repurchase of existing convertible notes maturing in 2026, 2027, and 2028.
  • This financing move may indirectly influence Snap’s stock trading as holders of the repurchased convertible notes could buy Snap shares or adjust hedges, potentially increasing demand for the company’s Class A common stock.
  • We’ll explore how the convertible note repurchase, funded by new debt, could influence Snap’s investment narrative and future outlook.

Find companies with promising cash flow potential yet trading below their fair value.

Snap Investment Narrative Recap

Belief in Snap as a shareholder often centers on the company’s ability to drive innovation in AR, grow its global user base, and capitalize on the shift towards digital advertising, even as competition and persistent losses remain real concerns. The recent US$550 million debt financing and convertible note repurchase are not expected to immediately shift the primary short-term catalyst, continued user and engagement growth, or address the largest risk, which remains Snap’s ongoing struggle with profitability due to rising costs.

Of the latest announcements, the completion of Snap’s share buyback program, repurchasing 57,293,000 shares for US$500.65 million, stands out. While the buyback may provide some support to the share price, profitability challenges and dependence on advertising revenue remain unaddressed, keeping the focus on execution in their core business.

Yet, despite these measures, the real risk investors should not overlook is that ongoing net losses and high cost structures could...

Read the full narrative on Snap (it's free!)

Snap's future outlook anticipates $7.6 billion in revenue and $825.0 million in earnings by 2028. This scenario requires 10.5% annual revenue growth and a $1,371.3 million increase in earnings from the current level of -$546.3 million.

Uncover how Snap's forecasts yield a $9.44 fair value, a 30% upside to its current price.

Exploring Other Perspectives

SNAP Community Fair Values as at Aug 2025
SNAP Community Fair Values as at Aug 2025

Simply Wall St Community members set Snap’s fair value between US$8.13 and US$23.80, with 12 distinct viewpoints captured. Yet with persistent net losses highlighted in recent results, differing opinions on long-term potential remain for good reason, explore more below.

Explore 12 other fair value estimates on Snap - why the stock might be worth over 3x more than the current price!

Build Your Own Snap Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

  • A great starting point for your Snap research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.
  • Our free Snap research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Snap's overall financial health at a glance.

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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.