Snap (NYSE:SNAP) stock is resembling its product a little too much recently. Like Snap’s photos, the stock’s value seemingly disappears in the blink of an eye. SNAP stock, which you may recall opened trading all the way up at $25/share last year, is in the midst of a prolonged slump.

This past week, SNAP hit fresh all-time lows. It fell below previous support as its slide has accelerated into the single digits. On Wednesday, Richard Greenfield of BTIG added to the selloff:

“We incorrectly stuck to our Neutral rating in October 2017 due to our view that communications apps were sticky and would protect Snapchat engagement, with management simply needing more time to figure out monetization.”

Given user numbers since then, that belief was mistaken. Greenfield cut his SNAP stock to a sell rating now, with a mere $5 price target, suggesting 40% more downside ahead.

Snap’s Core Problems Aren’t Improving

At first glance, looking at the chart, it seems crazy to think SNAP stock has further to decline. Just since June, Snap has faded from $14 to $9. At some point, there has to be a bounce, right? And from a technical perspective that could be the case.

But fundamentally, Snap still has many troubles to work through. Greenfield later added that Snap has disappointed both its users and analysts with the slow pace of innovation in the company’s core product. Let’s be blunt for a minute: It’s tough as a newcomer fighting against Facebook (NASDAQ:FB).

As long as the government isn’t interested in using anti-monopoly laws against the tech titans, it will be hard for smaller players like Snap to compete. While Snap has been innovative in the past, Facebook has quickly copied many of Snap’s best ideas and incorporated them into Instagram.

Without some big move that shakes up the market, it’s hard to see how Snap will be able to compete well against Facebook in the social media space. Twitter (NYSE:TWTR), which arguably has a more clearly-defined niche for users, has still struggled to develop a strong advertising business. Snap is unlikely to find it to be any easier.

User Growth and Cash Burn

At its core, Snap has two major problems. It isn’t growing its user base fast enough, and its cash burn is much too high. Unfortunately, recent quarterly results show little improvement in either metric.

In fact, this latest quarter actually had Snap’s user base outright decline. Daily Active Users dropped from 191 million to 188 million. A decline of that size by itself is hardly a catastrophe, but it speaks to a bad trend. Since going public, Snap’s user growth had been decelerating, seemingly due to Instagram’s efforts to counter Snap.

Now even that slower user growth has disappeared and turned to negative territory. Snap needs to fix this and quickly. As we’ve seen with other social networks such as MySpace, once users start leaving, network effects run in reverse and valuation can get impaired rather quickly as a downward spiral ensues.

On the financial side, Snap continues to burn through prodigious amounts of cash, along the order of $200 million per quarter. Given that it only does ~$300 million a quarter in revenues, it shows the difficulty Snap will have in turning the corner. Yes, they have a cost-cutting program in place, and ARPU is rising nicely.

But the shortfall in profitability is still so large, especially with the daily user base now in decline, that it will take more than incremental gains for Snap to become financially stable. As it is, don’t be surprised if the company decides to raise more capital next year. That could hit the stock hard. The farther it falls, the more shares the company will have to sell to raise funds.

Rather amazingly, Snap still trades at a higher price/sales ratio than peers including Facebook and Twitter. This may have made sense when Snap still looked like a young platform with high-growth potential. But Snap is rapidly showing that it doesn’t have explosive upside anymore. And unlike Facebook (and to a lesser extent Twitter), its operations aren’t self-sustaining.

From my vantage point, owning FB stock at a cheaper P/S ratio and a gusher of profits is the easy decision compared with SNAP stock.

SNAP Stock Verdict

The best argument for buying SNAP here is that it is wildly out of favor. Dating back to early July, SNAP stock is now in the red for ten consecutive weeks.

Given how strong the market has been overall, that’s a pretty incredible streak. And you can argue that analyst downgrades, such as the emphatic move from BTIG could mark a short-term bottom. Short sellers have also sold 15% of outstanding SNAP stock short. So there’s potential for a reversal.

On top of that, bulls got one more piece of good news on Thursday. Countering the BTIG downgrade, Pivotal raised SNAP stock from a sell to a hold on the suggestion that current prices better reflect Snap’s risk versus its reward. Additionally, Pivotal said that the potential for M&A activity should provide somewhat of a floor under Snap’s stock price.

But if the stock does bounce, it’d be another opportunity to cut losses for folks holding it from higher prices. Fundamentally, Snap hasn’t solved its major business issues.

Until user growth picks back up and cash burn slows down, SNAP stock will continue heading lower over the long term. Don’t let the $9 share price fool you, Snap’s $12 billion market cap is still quite rich for a company whose business model remains unproven.

At the time of this writing, Ian Bezek owned FB stock.