SNAP Drops in Price Amid Downgrade

Snap (NYSE: SNAP) shares were downgraded Thursday for the second-straight day, this time by Morgan Stanley, following the social media company's disappointing third-quarter results.

Morgan Stanley analysts lowered their rating on the stock to underweight from equal weight. They also reduced their price target to $11 a share from $14. Shares of Snapchat's parent fell 56 cents in the trading day’s first hour, or 4.3%, to $12.36, following a 15% plunge during Wednesday's trading.

In a note to clients, one Morgan Stanley analyst said the company's weak results "speak to growing challenges facing SNAP's monetization potential and user opportunity."

On Wednesday, analysts from RBC Capital Markets, UBS and Stifel —among others — downgraded Snap in the wake of the earnings report.

Snap on Tuesday reported third-quarter revenue of $207.9 million, well below the expected sales figure of $236.9 million. Daily active users — a key metric of engagement for Snap — totaled 178 million, below an estimated 181.8 million.

Capital expenditures for the Venice, California-based company were $25.9 million in Q3 2017, as compared to $17.2 million in Q3 2016 and $19.4 million in Q2 2017.

The analyst also said he sees "structural hurdles to SNAP's core ad unit format," and that "the pending app redesign creates further engagement/execution risks."

After the results were released, Snap CEO Evan Spiegel said Snapchat would get a redesign that will include a new feed inspired by Twitter and Facebook. He said the redesign would make it easier for more people to use the app.