Ever since Snapchat’s parent company, Snap (NYSE:SNAP) IPO’d earlier this year at roughly $17 per share, it’s been nothing but downhill for the social media app. Since March 3–the day the company officially went public on the stock market–shares of Snap have decreased 37.75 percent.
While Snap’s first day of trading was successful–closing at $24.88 that day–the company has been unable to reach those levels since then–and analysts at Morgan Stanley are certainly being called out as contributing factors.
Case in point, on Tuesday (July 11), Morgan Stanley analysts “downgraded” Snap, just one day after shares of Snap dropped below its IPO price of $17. Since July 10, shares of Snap have decreased 11.29 percent to $15.29 as of 4:05 p.m. EST on Wednesday (July 13). According to the Economic Times, Morgan Stanley’s adjustment comes ahead of the stock’s “lock-up” period expiry date of July 29.
As CNBC reported, the team of analysts downgraded its rating on Snap to “equal-weight” from “outperform,” and reduced its share price target from $28 to $16. To put that in perspective, Morgan Stanley had previously helped set Snap’s IPO price of $17.
SNAP’s ad product is not evolving/improving as quickly as we expected and Instagram competition is increasing,” Brian Nowak, the team’s lead analyst, wrote in a note to investors.
We have been wrong about SNAP’s ability to innovate and improve its ad product this year (improving scalability, targeting, measurability, etc.) and user monetization as it works to move beyond ‘experimental’ ad budgets into larger branded and direct response ad allocations.
In the same report, Reuters reported that the firm also slashed Snap’s revenue for 2017 by 6.9 percent to $897 million and projects daily active users will drop to 182 million, representing a 1.6 percent decrease.
“There’s a lot of people betting that this stock is going down and I think this analyst is just adding fuel to the fire,” King Lip, chief investment officer at Baker Avenue Asset Management commented to Reuters regarding Morgan Stanley’s downgrade.
On that note, the Economic Times stated that when a company slips below its IPO price, Wall Street considers it a “setback” that should be avoided by chief executives and its team of underwriters, although it’s not an uncommon occurrence for companies out of Silicon Valley.
Despite Morgan Stanley’s downgrade, other lead underwriter, Goldman Sachs remains unchanged on Snap. According to Reuters, the company still has a “buy” rating on the social media giant, with its stock price target unchanged at $27.
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Securities Disclosure: I,Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.