The New Year is upon us, and I’ve already identified my favorite play for the year! As I look at longer-term stocks I want to own, Snapchat (SNAP) is at the top of my list. I don’t use it, but I do love the company, and I think SNAP will be a big winner this year.  

SNAP is down over 35% after missing on earnings last quarter and has trended down since. But I really think SNAP will reverse. It is not done! I think they will figure out the advertising and it will be just fine! I am just waiting for confirmation from the chart. SNAP is a big Metaverse play and teenagers use it and love it. In fact, the younger folk use it more than Instagram in a lot of cases. It’s a good company and definitely something I want to be in. 

SNAP is one of my favorite companies on the market. I believe at some point, it’s going past $100. 

Fundamentals

Snap Inc. (SNAP) operates as a camera company in the United States and Internationally. The company offers Snapchat, a camera application that was created to help people communicate through short videos and images. Each of those short videos or images is called a Snap.

After a poor performance post IPO in 2017, where SNAP was just burning money for a few years, it became a turnaround story. In 2019 it began to accelerate its revenue growth, and this trend has continued post-Covid, with year-on-year revenues growing quarter after quarter. 

Notice the revenue growth since the 2019 bottom represented by the red line chart

This turnaround growth has been reflected in SNAP’s stock price. From COVID-19 lows of around $8, the stock was trading around $75 coming into the Q3 earnings report, a price gain of over 900% during this time.

I like to trade with the trend. I believe it is a trader’s job to get long strong stocks and short weak stocks. Snap’s revenue was growing, and the chart looked great. 

I was long SNAP into the Q3 print, but the company lowered guidance for Q4. Snap announced it sees Q4 Sales of $1.165B-$1.205B vs $1.36B Est. This sent the stock down 20% the next day! I got hosed on earnings, but I took the L and moved on. Thank goodness for that because it has continued trending much lower since then. It’s okay to be wrong, but it’s not okay to stay wrong.

Despite this setback, I still love SNAP’s business and story. I think they will figure out the advertising and it will be just fine! I am just waiting for the technicals to line up so I can have a good risk/reward trade setup. I believe that 22′ could be the year for SNAP and expect it to trade above $100 at some point.

Technicals

$48 is a significant level of support from late 2020 and early 2021. I would like to see SNAP hold above this price and for $48 to become support once again. Right now, SNAP is just chopping around this area. Furthermore, the 13 and 30-day moving averages (MA’s) are pointing down, and SNAP is trading below them. I would like to see SNAP break above these MA’s on high volume and for them to start to point up, indicating a change in trend. 

I would then like to get long as SNAP pulls back and hopefully puts in a higher low. I will be watching SNAP daily for this setup to occur before I enter a trade. If this were to happen, I would be looking for a first target of $60 before SNAP begins a run to over $100 longer-term.

Bottom Line

My favorite stock for ’22 is SNAP. It’s in a hot sector, has a loyal user base, and I love the business. SNAP is a big Metaverse play and teenagers use it and love it. SNAP got chopped down after it guided lower than expected in its Q3 2021 results. 

I got hosed as I was holding calls into the Corporate Earnings Release. I took my L like a big boy and moved on, and it was a good thing too because the stock has continued to trade lower. Having said that, if I liked SNAP at $70, I love the company even more at $48. I am patiently waiting for the technicals to align before I get into the stock. 

I want to be in SNAP and think that at some point, we see this at $100 plus. When I have entered the trade, I will be sure to alert subscribers. 

Here’s to a prosperous 2022 for all!