After rocketing to close to a 60% gain in its first two days as a publicly-traded company, many analysts are starting to take a closer look at Snap Inc. (NYSE:SNAP), with many not liking what they see.
Several prominent sources came out over the weekend and made bearish calls on the social media company.
The first came from Andrew Bary at Barron’s, who sees at least 50% downside in the stock. Bary pointed out Snap lost $515 million last year with the red ink expected to continue until at least 2018. Snap is also limited by a large user base that skews to young folks in North America and Western Europe. Where will the growth come from?
Bary also highlighted Nomura/Instinet analyst Anthony DiClemente thoughts, who slapped a $16 price target on the stock. DiClemente sees four negatives, including slowing user growth, slowing user monetization growth, fierce competition from Facebook, and a rich valuation.
Remember, Snap is valued at 34 times projected 2017’s revenue.
Needham’s Laura Martin is also bearish, setting a price target of between $19 and $23 per share. She thinks Snap’s total addressable market is much smaller than Facebook’s, and it’s unlikely to grow as much as bullish investors anticipate. She also pointed out IPOs tend to underperform in their first year as publicly traded companies.
Snap shares were weighed down by these negative reports during early afternoon trading on Monday, falling $1.43 each or 6%, to $25.46 each. That is well off Friday’s highs of $29.27 per share.
