Shares of Snap Inc. (NYSE:SNAP) have fallen below the $14.50 mark and continue to slip after a senior underwriter at Morgan Stanley further downgraded the tech stock.
Snap exploded out of the gate following its Initial Public Offering on March 2, 2017, reaching a high of $29.44 in its first two days of trading. With the share price teasing 50% declines since then, serious questions are being raised about the social media darling’s ability to turn it around.
Snap Inc. has never turned a profit, and in 2016 lost more than $500 million. The stock is one of the most expensive to borrow on Wall Street, but has attracted major interest from short-sellers of late. Short interest as a percentage of float is now at almost 18%.
Currently there are 682 million shares of Snap Inc. outstanding. On July 31st 400 million shares are set to be released to free trading. This reality has spooked analysts. Target prices now sit anywhere from $30 plus to the single digits.
Snap is facing fundamental issues with regards to it long term growth prospects. It is expected to bleed cash for the foreseeable future. The company is also in fierce competition with other social media platforms including Instagram and Facebook who have introduced their own versions that rival the popular Snapchat interface.
With scant positives to take from Snap’s current trajectory, it may take some time for the stock to fall further before it can be considered a reasonable gamble.
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