We recently started a series called “Penny Stock of the Day”. These ideas are geared towards traders with an extremely high risk appetite.
Our Penny Stock of the Day is chosen by screening for stocks under $5 and then applying technical analysis on the shortlisted set of penny stocks showing unusual volume. When making these trades, please make sure to pay vigilant attention to pricing moves and have a strict stop loss in place to avoid significant losses.
Penny Stock of the Day: Snap Inc. (NYSE: SNAP)
Today’s penny stock pick is the technology company, Snap Inc. (NYSE: SNAP).
Snap Inc. offers Snapchat, a visual messaging application with various tabs, such as camera, visual messaging, snap map, stories, and spotlight that enable people to communicate visually through short videos and snaps.
It also provides Snapchat+, Lens+, and Snapchat Platinum, a subscription service that provides subscribers access to exclusive, experimental, and pre-release features; Spectacles, an augmented reality (AR) glasses; and advertising products, including AR ads and Snap ads comprises a single image or video ads, collection ads, dynamic ads, story ads, commercials, sponsored snaps, and promoted places.
In addition, the company offers campaign management and delivery, an advertising platform that provides automated, sophisticated, and scalable ad buying and campaign management; and measuring advertising effectiveness solutions. The company was formerly known as Snapchat, Inc. and changed its name to Snap Inc. in September 2016.
Website: https://www.snap.com/
Latest 10-K report: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001564408/f92784bc-f84b-48b8-a768-b1e4182fef7d.pdf
Analyst Consensus: As per TipRanks Analytics, based on 25 Wall Street analyst offering 12-month price targets for SNAP in the last 3 months, the stock has an average price target of $7.90, which is nearly 61% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company recently surpassed a $1 billion annualized run rate with over 25 million subscribers. This is high-margin revenue that is not dependent on the volatile ad market.
- Irenic Capital Management recently secured a ~2.5% stake in Snap and sent a letter to CEO Evan Spiegel demanding operational changes to unlock value, detailing the path to realizing $26.37 per share. SNAP is currently trading near its lowest valuation multiples since its 2017 IPO.
- SNAP seems to have onboarded the AI integration wagon. Snap has partnered with Perplexity to bring conversational AI to the platform, enhancing engagement and ad targeting.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern Breakout: The daily chart shows that the stock has been forming a falling wedge pattern for the past several months. These are marked as purple lines. It has typically taken support at the bottom of the wedge before bouncing back. The stock has currently broken out from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
SNAP – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line is above the -DI line, and the ADX line is currently moving higher from below the +DI and -DI lines.
#3 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#4 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink dotted line. This looks like a good area for the stock to move higher.
SNAP – Weekly Chart
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for SNAP is above the price of $4.95.
Target Prices: Our first target is $7.00. If it closes above that level, the second target price is $8.50.
Stop Loss: To limit risk, place a stop loss at $3.80. Note that the stop loss is on a closing basis.
Our target potential upside is 41% to 71%.
For a risk of $1.15, our first target reward is $2.05, and the second target reward is $3.55. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of net losses.
SNAP – Consolidated Statements of Operations
- The company was recently hit with an EU probe. In late March 2026, the European Commission launched a formal probe into Snapchat under the Digital Services Act (DSA) regarding child safety, grooming, and age verification. This adds to existing legal heat and lawsuits from the UK, Australia, and the US (New Mexico). Broader risks include age-restriction talks in the UK/Germany/Australia and spillover from Meta/YouTube social media lawsuits.
- Hedge Funds Decreased Holdings by 6.8M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company has intense competition from TikTok, Instagram Reels, and AI platforms.
- Corporate Insiders placed Informative Sells of Shares Worth $2.3M in the Last 3 Months.
Insiders | Source: TipRanks.com
- The company has ongoing legal proceedings. On November 11, 2021, the company was named as a defendant in a federal securities class action lawsuit filed in the U.S. District Court for the Central District of California. The lawsuit alleges false or misleading statements and omissions concerning the impact that Apple’s App Tracking Transparency framework would have on SNAP’s business. Beginning on January 20, 2022, the company was named as a defendant in various federal and state courts by plaintiffs alleging that the design and use of the company’s platform, and those of its competitors, is addictive and harmful to users, with most of the cases focused on mental health harms and users under 18 years old.
- Despite being a loss-making company, the executives are being paid significant compensation.
SNAP – Executive Compensation
As you can see, today’s featured penny stock offers big upside potential… but it also comes with a number of risks and red flags. As always, when dealing with penny stocks, we advise caution before entering into such high-risk ventures. Remember to think before you trade… understand the risks… and if you decide to trade, stick to your stop-losses!
Happy Trading!
Trades of the Day Research Team
READ BEFORE TRADING PENNY STOCKS: The allure of penny stocks lies in their potential to deliver massive gains in a short period of time. However, in exchange for that opportunity, most penny stocks carry tremendous risk. They can be extremely volatile and are susceptible to “pump and dump” schemes and fraud.
Unlike regular stocks, the financial condition of most penny stock companies can be extremely difficult to analyze, as the majority of such stocks are traded on over-the-counter (OTC) exchanges, which are typically less transparent and less regulated than the major exchanges. In fact, in the penny stock space, it’s often easier to spot warning signs and red flags than it is to identify a sound investment. Nevertheless, we do our best to identify short-term trade opportunities in this exciting space because we know some of our readers are looking for high-risk, high-reward ideas. We just urge you to make sure you fully understand the risks before making any of these trades.
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