Snap may have doubled this year, but don’t buy because of ‘FOMO,’ says technician

It wasn’t a snap decision.

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After two years on the sidelines, BTIG’s Rich Greenfield upgraded shares of social media company Snap to a buy rating Thursday. The stock surged more than 12 percent on Greenfield’s call that the name can reach $15 based on advertising growth.

Snap has more than doubled in 2019, gaining nearly 105 percent. But the move followed what was a steep slide in the fourth quarter, and the shares are still roughly 38 percent from their 52-week high last March.

The stock has undoubtedly been on a tear, but two market watchers said to be very careful here.

« [D]o not chase a position on a fear of missing out, » Bill Baruch of Blue Line Futures said Thursday on CNBC’s « Trading Nation. » From a technical standpoint, he contended the stock faces « tremendous resistance with the trend line from its high. »

He noted that if the stock could break the resistance and close above $12, tail wind momentum could lift it to $14 – $17.

But on the flip side, Baruch believes the name could just as easily reverse course and fall back to $7. So given the potential downside, he argues to « stick to your game plan » and says « don’t chase it. »

In an effort to attract new users Snap has undergone a series of design changes, among other things, but growing competition from Facebook and Twitter as well as a number of high-level executive departures have continued to plague the stock over the last year.

Strategic Wealth Partners’ Mark Tepper said he wouldn’t be a buyer of Snap until the company can prove it can appeal to a broader user base.

He said that it has a « cool product » and that it’s the « most preferred social networking program among teenagers, » but the problem, according to Tepper, is that teenagers are not the ones with money to spend. This means the platform is less valuable from an advertising standpoint.

« [T]eenagers don’t have the deepest pockets and they [Snap] are really struggling to attract the 35-plus crowd. Those are the people with the spending power, » he said, adding that « [t]hey’re seeing revenue per user that’s about half of what Twitter realizes. »

The stock would be « intriguing » at $6, Tepper said, but for the time being, and after the surge higher, he said it’s a tough name to get behind.

Disclosure:
CNBC parent NBCUniversal is an investor in Snap
.

Source: CNBC

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