The factors in favour of a drop in the Snapchat share price:
As we have just seen, Snapchat shares have many advantages and strengths that could encourage investors to focus on a medium- to long-term bullish strategy. But before taking such a position, it is of course essential to also know the weaknesses of this company that can tip the balance towards a more mixed or downward trend. Here are the main weaknesses of this value.
Snapchat's first weakness is directly related to the undervaluation of its share on the stock market. Indeed, after a failed IPO on the stock market in 2012, the group still fails to attract and convince investors. This damages its brand image and slows down its development.
It should also be noted that the Snapchat group is struggling to diversify its activities in order to generate more income. Indeed, since its creation, the company has tried several times to diversify into different areas of what its main activity offers without any success since most projects have ended in failure with the consequence of a significant loss of money for the company. This was particularly the case with the Snapchat Spectacles application, which failed very badly.
While we can welcome the almost constant increase in the number of users of the Snapchat application, these figures actually lack transparency. Indeed, we notice in parallel that the activity models of the average user of this application become, over time, more and more irregular. The number of users who are really active and therefore potentially profitable has been falling sharply for several years now.
Another weakness concerning Snapchat and its stock market share concerns this time the group's own business model, which depends more and more on advertising in order to achieve its turnover. Indeed, since the application offered to the general public is free, more than 96% of the company's turnover comes from advertising. While this model is well suited for other digital companies such as Google or Facebook, it does not seem to really adapt to the activities of Snapchat users.
To conclude with the disadvantages of Snapchat, we can also deplore an excessive comparison of this application with the Facebook social network. However, Snapchat's model is totally different from that of these two competitors and the functionalities here are much more limited. We also know that consumers prefer to use applications such as Facebook's Messenger or Whatsapp as instant messaging rather than Snapchat, which has some limitations here.