SNAP Stock News and Forecast: SNAP snaps back as risk assets boom

SNAP stock closes Friday up 1% as equities rally.
SNAP underperforms the major indices as Nasdaq closes up 2%.
SNAP stock is down 73% year to date.

Ivan Brian FXStreet

Snap (SNAP) stock underperformed the main indices on Friday as it continued its struggle to regain some credibility with investors. With the stock down a colossal 83% over the past year and 73% in 2022, it is no wonder that attracting buyers will prove difficult. "Fool me once, shame on you" springs to mind.

SNAP stock news

SNAP caught a couple of bullish analyst notes in the last few weeks as bottom pickers waded into the carcass. UBS said the bottom may be in from July in terms of growth, and Bank of America liked what they saw in a leaked internal memo from Snap CEO Evan Spiegel. We believe it was The Verge that first reported details of the memo. In the memo, Evan Spiegel said he is aiming to grow users up to 450 million by the end of next year with a focus on attracting older users. This might include your author then, whose only experience with the app so far is of his nieces and nephews making a mockery of him!

The memo noted Spiegel as saying they got punched in the face by 2022. Oh, I just see that older means the 30-40 age bracket, yikes! Ok, I might not quite make it then! Anyway, SNAP out of it. So maybe some green shoots but a reminder that it was only in May that the company said it will again miss estimates for revenue and earnings. That led to another sharp sell-off.

SNAP stock forecast

The key question remains how much bad news is in the price. Has the CEO talked the stock down sufficiently, so SNAP can beat or at least match lowered estimates? We will not find that out until the next earnings on October 21. But until then we may get some reprieve as equities look in a more positive light. Tuesday's CPI should confirm inflation has peaked. This will allow risk assets more room to breathe higher as investors wade into risk assets and yields soften or at least stabilize. I think this may be the wrong trade, but it will take a few months of CPI to demonstrate that inflation is falling but just not quickly enough. Nor will it likely fall to 2% or 3% at all in the next few years.

However, SNAP has set up a bullish divergence with the RSI already trending higher despite SNAP falling on the weekly chart. The RSI was also oversold. Beaten-up tech stocks were a noted feature of the summer rally, but SNAP never managed to join the party, so this time it may be a second chance.

SNAP weekly chart

Meanwhile, on the daily chart below it has broken above the 50-day moving average. The most recent low is at $9.85 and SNAP needs to hold above this to keep any hopes of this possible bullish trend alive.

SNAP daily chart

Author

Ivan Brian

FXStreet

Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.

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