Snap Inc. (SNAP Stock Report) has been a success story in 2019 after a torrid 2018 apart from a slight pop in February. SNAP stock price took a significant dip in the markets and only showed signs of recovery at the beginning of this year.
There have been bullish sentiment forming, trying to justify Snap stock price following an impressive Q2 earnings report. However, could Snap experience a pullback?
Competition from Facebook
The company’s stock price benefited greatly from its brand power. Its demographic target of young people has been one of the company’s strategies since the beginning. However, Snap faces competition from Facebook (FB Stock Report) which bought Instagram to take on Snapchat. Instagram has all the key features that Snapchat has to attract young users.
Facebook is also building a messaging app called Threads that offers constant engagement synonymous to Snapchat. With this, it is targeting the young demographic. It also has deeper pockets than Snap. This could be enough to mount a competitive onslaught and is why investors could be cautious about Snap stock.
Recession to Hurt Snap Stock Price?
Since the beginning of 2019, Snap stock price has gained more than 193%. Although shares slipped after its Q2 2019 earnings report, the company has still managed to turn a considerable profit for its shareholders. However, with the recession, the stock may not manage to maintain its lead.
Social media companies rely on ad revenue and in the middle of recession companies may be cautious on how they spend on ad revenue. Companies will most likely cut ad spending on Snapchat ahead of Facebook because of its demographic.
The volatility of Snap Stock Price
Despite impressive Q2 earnings the company did not manage to shake the criticism of the stock being wild. Since its IPO, Snap stock price has been at war with Wall Street. Its stock is a time-sensitive investment which means if you don’t quit at the opportune moment you will lose your investment.
Snap stock is a risk because the company does not give the utility other social media platform offers. So it is better to avoid the stock.