On Wednesday, May 2, the American technology and social media company Snap Inc (SNAP  ) announced its 2018 first quarter earnings. Due to a massive miss on earnings and over 15 analyst downgrades, Snap shares fell a whopping 21% over the day. On Thursday, Snap stock continued its bloodbath, tumbling down .54% to close at an all-time low price of $10.97. Snap's current market capitalization is just $13.27 billion currently. Its stock is down over 50 percent from its 52-week high of $23.57.

Snap reported a loss of 17 cents per share, in line with Wall Street expectations. It reported revenue of $230.7 million, missing consensus estimates of $244.5 million. It reported daily active users of 191 million, missing consensus estimates of 194.2 million. Average revenue per use was $1.21, missing consensus estimates of $1.27. Snap's ad prices have fallen 65% year-over-year after the company switched to an automated auction-based system.

Snap reported a few bright spots. Its advertising revenue is up 62% year-over-year. Its user numbers are still growing. CEO Evan Spiegel stated that user retention rates have increased for older users. Sales growth outpaced cost growth.

But Snap continues to face many challenges ahead. It is quickly burning through cash raised from its 2017 initial public offering (IPO). Its app redesign last year is widely unpopular, with celebrities like Kylie Jenner slamming the tweaks. Executives also claimed during the conference call that revenue growth would decelerate substantially in the next quarter.

Analysts at various Wall Street institutions remain bearish on Snap. Morgan Stanley (MS  ) believes the company's turnaround will be challenging. Piper Jaffray is skeptical, citing poor leadership and mismanagement, and competition from Facebook's (FB  ) Instagram. Deutsche Bank (DB  ) analysts warned that advertisers are increasingly worried about spending money on Snap advertising.

Going forward, Snap has fundamental challenges. Its main demographic is young and relatively poor. Its dance with advertisers is becoming trickier. Wall Street remains skeptical about the company. Its design concerns are important, as a quality user interface is a major factor of consumer demand. If Snap continues to badly miss analyst expectations in subsequent quarters, its stock will enter a serious free fall. Snap is essentially racing against the clock, attempting to use its decreasing cash reserves to turn around its weakening business model. At best, Snap could slowly reverse its bad fortune and become profitable one day. At worst, Snap could sustain enough losses to become insolvent and then bankrupt. Investors should be knowledgeable of the risks associated with Snap stock now.

The author does not hold any positions in any of the securities above.