The Snapchat share price is set for a steeply lower open after falling nearly 29% in premarket trading on a profit warning. Snapchat owner Snap Inc slashed its earnings forecast for the second quarter, saying that economic conditions had worsened more than expected last month. The social media company also blames the war in Ukraine and changes to privacy settings for the iPhone for its woes.
CEO Evan Spiegel has hinted that Snap Inc will slow down its employment process to manage costs after its first-quarter earnings missed analysts’ expectations. As a result, the Snapchat share price is on course to hit two-year lows after the results were released on Monday’s after-hours.
The slump in the Snapchat share price is also dragging down stocks of Facebook (Meta) and Google’s parent company Alphabet, both of which earn a significant portion of their revenues from online advertising.
Snapchat Share Price Outlook
The technical basis for the steep drop comes from the breakdown of the double top pattern on the daily chart. The progressively lower tops seen on 15 February and 6 April 2022. The neckline break at 26.98 opened the door for the decline that took out the 19.54 support level (10 June 2020 low). The decline to the premarket price at 14.95 has also degraded the support at 16.31. This leaves an opportunity for the bears to target 12.43, the site of the 21 April 2020 low.
Conversely, a recovery above 16.31 allows for a retracement to 19.54. If the price activity breaches this resistance and extends towards 26.98, the downside gap that was formed by the premarket slump in price will be covered. Additional upside targets reside at 30.53 (29 April 2022 high) and 39.59 (5 April 2022 high). There is a potential pitstop formed by the 35.00 psychological price mark, where the lows of 20 January and 24 February are located.