Shares jumped as Rothschild Redburn handed Snap Inc. one of its most aggressive upgrades in months, shifting to Buy from Neutral and doubling the price target to $10 from $5. At $5.88, the stock surged 4.2% against a flat-to-down NASDAQ, signaling that this is a company-specific catalyst investors are taking seriously. The question: Is Snap's turnaround story finally real, or is the analyst front-running a profit margin that hasn't been proven yet?

  • A 77% Upside Call Built on Revenue Diversification

The new $10 target implies roughly 77% upside from where shares were trading.

Rothschild forecasts an 11% revenue CAGR through 2028, driven by 7% advertising growth and subscription revenue nearly tripling — from $745 million in 2025 to $1.755 billion by 2028. That subscription ramp is the bet's linchpin. If it slows, the entire thesis deflates.

  • Layoffs and Cost Cuts Are Doing the Heavy Lifting

Snap is cutting roughly 16% of its global workforce — about 1,000 jobs.

The company expects over $500 million in annualized cost savings by the second half of 2026.

Full-year operating expense guidance was slashed by $250 million to $2.75 billion, and stock-based compensation — a persistent concern — was trimmed by $150 million to $1.05 billion.

Rothschild believes Snap's core business hit breakeven last year and is "set to be meaningfully profitable" in 2026.

  • Margins Are Expanding, But From a Low Base

The analyst projects gross margins rising from 55% in 2025 to 63% by 2028.

That path depends on high-margin subscriptions, a shift to better-performing ad formats, and tighter alignment of infrastructure costs with regions that actually generate the most revenue per user.

Q4 2025 gross margin already reached 59%, up from 55% the prior quarter , so momentum exists — but sustaining it requires execution, not just cuts.

  • Wall Street Isn't Unanimous — And Users Are Shrinking Where It Counts

Stifel set a lower target of $5.25, though it noted Q1 revenue near guidance highs and EBITDA beating expectations by over 20%.

Raymond James kept an Outperform rating but cut its target to $8, flagging concerns about Snap's AI strategy. Crucially, daily active users in North America — by far Snap's most profitable market — have been declining for several consecutive quarters. No cost cut fixes a shrinking audience in the region that pays the bills.

The bottom line: Rothschild is betting Snap can become a profitable, subscription-driven business. The math works on paper. The risk is that Wall Street is rewarding the spreadsheet before the customers confirm it.