Snap share price plunged sharply as investors focused on the company’s earnings. It crashed to a low of $7.78, which was the lowest level since February 2019. It has crashed by more than 90% from its highest level in 2021. Other social media stocks like Meta Platforms and Pinterest shares all plunged after the latest Snap earnings.
Is it safe to buy the Snapchat dip?
Snap is a leading social media company that has a huge following among young people. Its results on Thursday showed that the company had a strong quarter even as it warned about its future. The company had a revenue of $1.13 billion in the third quarter, a 6% from the same quarter in 2021. Its adjusted EBITDA came in at $73 million and its free cash flow rose to $18 million. Snap’s number of users rose to more than 363 million, a 19% increase.
One challenge for the Snapchat share price is that the company was historically valued as a growth stock. At the time, the company was seeing double-digit revenue growth, which made investors comfortable with its lack of profitability. As such, the stock is struggling as its growth fades and path for profitability gets dim.
Like other social media companies, Snap is struggling as competition with the likes of TikTok and BeReal rises. Most companies have recently shifted their ad dollars to TikTok, which has gone viral in the past few years. At the same time, the recent iOS upgrades have made it difficult for companies to deliver targeted advertisements.
Meanwhile, with inflation rising, companies are being careful about their ad spending. So, what next for Snap?
Snap share price forecast
Turning to the weekly chart, we see that the Snap stock price has been in a freefall in the past few months. And it seems like the situation always gets worse after every quarter. The stock dropped to a low of $7.78 after its earnings. This means that it managed to move below the lower side of the bearish pennant pattern that is shown in black. It also crashed below all moving averages.
Therefore, the path of the least resistance for the Snapchat share price is lower, with the next key support level being at $6. A move above the resistance at $10 will invalidate the bearish view.