Snapchat Stock Plunges: Here's Why
User Growth: While Snapchat beat analyst estimates by adding 8 million daily active users in Q4 2023, this pales in comparison to the 12 million added during the same period in 2022. This year-over-year decline indicates a potential slowdown in user engagement, despite reaching a total of 414 million daily users by the end of 2023 (10% more than 2022).
Revenue Misses Expectations: Despite the year over year user growth, revenue fell short of expectations at $1.36 billion ($1.38b expectation), raising concerns about the company's ability to monetize its user base. This is further compounded by weaker brand advertising growth compared to competitors like Meta and Amazon.
High Stock-Based Compensation (SBC) Raises Red Flags: Snapchat's reliance on SBC, a form of employee compensation using company shares, has investors wary. Issuing new shares dilutes existing shareholder ownership and impacts profitability, leading to lower valuations.
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Layoffs Fuel Uncertainty: The recent 10% workforce reduction adds to the already existing anxieties about Snapchat's financial health and future prospects.
Analyst Opinions Divided: Barclays analysts stated “buying the dip seems worrying, but is likely the right thing to do here” giving Snapchat a $15 price target. They also said “Snap feels like META around 5 quarters ago, at the cusp of some pretty nice recovery trends, but with few believers in the thesis.” That being said many other analyst have downgraded $SNAP and said they expect it to go lower.
How Our Exclusive In-House Analysts Are Playing $SNAP
"I think there could more downside to come to $10 area. Levels to the upside would be $12.50, $13, $14, and $15. Easy levels to remember." -SwingingBull
"I don't like it at these current levels based off of the risk:reward. I like personally looking for lower down at $7.33 or $4.82. Watching for an a move below one of those levels and a 4H candlestick closure back above like we teach in the discord." -BTC_Jay
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Trade Idea 1: Bearish/Short At Current Levels With Low Risk
Entry: Current levels ($11.40)
Target: $10 And Below
Stop Loss: $11.55
Trade Idea 2: Bullish Breakout
Entry: Watching for a break and retest of $11.55
Target: $12.50, $13+
Stop Loss: $11
Trade Idea 3: Bullish Support
Entry: Watching for a break below $7.33 followed by a 4H close back above
Target: $8+
Stop Loss: $6.79
Trade Idea 4: Bullish
Entry: Watching for a break below $4.82 followed by a 4H close back above
Target: $5.31+
Stop Loss: $4.50
Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.
