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Investing.com -- Guggenheim downgraded Snap to Neutral from Buy, citing increasing investment needs that will pressure profitability. The firm also lowered its price target to $11 from $13.

“The company plans to increase investment in 2025 to bolster top-line growth, as SNAP exits the year toward the low end of the peer range,” analysts wrote.

While Guggenheim does not necessarily view the additional spending as a mistake, it noted that past efforts to accelerate revenue growth have not yielded the desired results.

As a result, the firm pushed back its forecast for GAAP profitability to 2027, compared to its previous estimate of 2026.

“The likely need to invest more to be competitive drives further pressure on profitability, notably pushing our forecast for GAAP profitability to 2027 compared to 2026 in our pre-earnings model,” said the firm.

Despite the concerns over profitability, Guggenheim acknowledged Snap’s strengths, particularly its large and engaged user base in younger demographics, which remain difficult for advertisers to reach.

Additionally, the company is exploring early-stage advertising opportunities such as Sponsored Snaps and Promoted Places. However, analysts warned that “profit pressure is reflective of intense competition and a challenging growth path.”

The decision to downgrade Snap comes as the company attempts to reinvigorate growth within a highly competitive digital advertising landscape.

The firm pointed to CEO Evan Spiegel’s commentary on earnings calls, which has consistently emphasized a goal of revenue acceleration. However, Guggenheim’s analysis suggests that Snap has struggled to deliver meaningful progress despite these efforts.

Given these factors, the firm now sees shares as fairly valued at its revised price target of $11. “With profit pushed out, we step aside,” analysts concluded, signaling a more cautious stance on the stock moving forward.