You will be redirected back to your article in seconds

Snapchat Parent’s Shares Fall as Analysts Say It’s Ridiculously Overvalued

Shares of Snap fell 12% Monday on the Snapchat parent’s third day of public trading, after opening up 4%.

The pullback indicates profit-taking after investor gusto for Snap led to a huge run-up in the two days following its IPO on March 2. It also comes after Wall Street analysts warned that Snap shares are drastically overvalued, with none so far having issued a “buy” rating on the stock.

Snap shares were trading around $25.11 per share Monday at 11:15 a.m. ET, down from the Friday closing price of $27.09 but still up 46% from the IPO price. At $25 per share the Venice, Calif.-based company has a market cap of about $29 billion, making it worth more than CBS, Viacom, Dish Network and Twitter at that price. That’s despite Snap posting a $515 million loss for 2016, and no profit expected on the near horizon.

[UPDATE, 4:15 p.m. ET: Snap shares closed down 12.3% Monday, to $23.77 per share. That’s below the $24.48 closing price on the day of its IPO, but still well over the $17-per-share initial public offering price.]

Of seven analysts who have initiated coverage of Snap, five have a “sell” or equivalent rating and two have a “hold,” CNBC reported. CFRA Research also initiated coverage Monday with a “sell” opinion.

Snap’s stock is “like a lottery ticket,” Needham & Co. analyst Laura Martin wrote in a note to clients Monday, rating the stock “underperform.” The firm estimates Snap Inc.’s value at $19 to $23 per share.

While Martin noted that “sometimes lottery tickets do pay off,” she detailed a litany of risks, including that Snap has “no clear path to profitability before 2020.” She also estimated that Snap’s total address market in the 10 biggest ad markets is about 650 million — one-fifth the size of Facebook’s — because Snapchat targets a 13-34 demo and requires high-end devices. In addition, she noted that “fast follower” competitors (like Facebook’s Instagram) are copying its best ideas, and that Snap is controlled by its two founders, CEO Evan Spiegel and CTO Bobby Murphy (new shareholders have no voting rights).

“Academic literature suggests that the sexier and more glamorous a company’s IPO, the more likely it is to be overpriced at its IPO date and to suffer meaningful downwards earnings and valuation revisions in the first eight quarters after it goes public,” Martin wrote.

CFRA equity analyst Scott Kessler set a 12-month price target on the stock of $22 per share. “We see strong user engagement, but user growth that has decelerated,” he wrote. Kessler predicts Snap’s revenue gains will outpace rivals, but he said the company faces risks as it “transitions from more of niche product to a mass-media offering,” which will require it to “notably increase its size/scale.”

Last week, Pivotal Research analyst Brian Wieser initiated coverage of Snap with a “sell” rating, valuing the company at $10 per share based on financial estimates for 2017. “Investors in Snap will be exposed to an upstart facing aggressive competition from much larger companies, with a core user base that is not growing by much and which is only relatively elusive,” he wrote in a note.

Snap got a vote of confidence last Friday from NBCUniversal, which revealed that it had taken a $500 million stake in the disappearing-message and media company in the IPO. That helped lift Snap shares 11% for the day, after a 44% surge on Thursday.

Popular on Variety

More Digital

  • Elite Season 2

    San Sebastian: Spain’s SVOD Players Debate Competition, Brand, Talent

    SAN SEBASTIAN  — Executives from HBO, Netflix, Amazon and Movistar+ and “Elite” co-creator Darío Madrona took to the stage to field questions on the Global Impact of Spanish Series. Here, briefly, are five takeaways: 1.Spain First “La Casa de Papel” was watched by 34,355,956 Netflix accounts over its first seven days,  after a July 19 [...]

  • Tinder - Swipe Night

    Tinder's Apocalyptic 'Swipe Night' Interactive Dating Show Sets Release Date

    Tinder next month will bow its first original entertainment content — “Swipe Night,” an interactive adventure series in which viewers are forced to make dating choices on humanity’s last night on Earth. Variety previously reported details of the location-based social network/dating app service’s foray into original content, which recently wrapped production in Mexico City and [...]

  • Editorial Use onlyMandatory Credit: Photo by

    YouTube Rolls Back Verification Changes, Says Verified Creators Can Keep Their Badge

    A day after announcing significant changes to its verification program, YouTube announced Friday afternoon that it won’t be de-verifying existing creators after all. “We heard loud and clear how much the badge means to you,” said YouTube product manager Jonathan McPhie in a blog post. “Channels that already have the verification badge will now keep it [...]

  • BLive: BitTorrent Live Streaming App to

    BitTorrent to Launch Public Beta of New Live Streaming App

    BitTorrent is getting ready to open the floodgates for its new live streaming app, dubbed BitTorrent Live: The company plans to launch a BitTorrent Live Android app on various app stores as part of a public beta test late Friday, according to a spokesperson. BitTorrent Live, which is also known as BLive, is being described [...]

  • Netflix - Apple TV

    Netflix Stock Drops After CEO Acknowledges 'Tough Competition' Coming From Disney, Apple

    Netflix shares fell as much as 7% Friday to a nine-month low, coming after CEO Reed Hastings commented that the November launches of Disney Plus and Apple TV Plus will introduce a “whole new world” of competition. Hastings, speaking at the Royal Television Society conference Friday in Cambridge, England, said, “While we’ve been competing with [...]

  • Facebook

    Facebook Suspends Tens of Thousands of Apps During Privacy Investigation

    Facebook has suspended tens of thousands of apps ever since it began investigating potential privacy abuses, the company said Friday. The apps in question had been built by around 400 developers, and a suspension doesn’t necessarily indicate actual privacy violations. Facebook began combing through millions of apps that made use of its platform after the [...]

  • tivo logo

    Tivo Plans to Launch Android TV Dongle, Tivo+ Curation App

    DVR maker Tivo is getting ready to release a new device that may not record television at all: The company plans to launch a $50 Roku-like TV dongle early next year, its new CEO Dave Shull revealed in a conversation with CNN this week. The new device will be powered by Google’s Android TV platform, [...]

More From Our Brands

Access exclusive content