Snap Inc (NYSE: SNAP) stock dipped below $8 per share this week for the first time, as Wall Street becomes increasingly concerned with the company’s ability to fend of the competition and execute its long-term strategy.
Unfortunately for Snap investors, Evercore ISI analyst Anthony DiClemente says he doesn’t see a light at the end of the tunnel any time soon.
In the most recent quarter, Snap reported that it lost 3 million users, and DiClemente says Facebook (FB) subsidiary Instagram is one of the major causes of Snap’s engagement problem.
“We believe that competition (particularly from Instagram) is irreversibly reducing SNAP’s opportunity to deliver on long-term investor expectations,” DiClemente says.
In addition, the departure of chief strategy officer Imran Khan last month is the latest in a string of high-level executive departures at Snap in the past year.
With SNAP stock at all-time lows, users abandoning the platform and a revolving door of corporate leadership, Snap seems to be limping into the end of 2018.
“Given the lack of positive catalysts in the face of declining users and decelerating revenue growth, not to mention management turnover ahead of the seasonally critical 4Q, we lower our Target Price,” DiClemente says.
Evercore ISI has reiterated its “underperform” rating and dialed back its price target from $9 to $7.
DiClemente isn’t the only analyst lowering expectations for Snap. Citigroup analyst Mark May also reiterated his “sell” rating for Snap this week. May says SNAP may be forced to either dial back its spending or raise additional capital as soon as 2019 if it doesn’t improve its business fundamentals.
“Recent executive departures, user trends in Q2, continued operating losses and Q3 guidance do not bode well for near-term results,” May says.
He says that even at all-time lows, SNAP stock still trades at a valuation premium to most of its peers.
“Without meaningful changes in revenue growth and/or operating leverage, Snap could be forced to further rationalize costs and/or raise additional capital in 2019/2020,” May says.
May has reduced his price target for SNAP stock from $8 to $7, which includes a $2 potential buyout premium. He says…
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