Snapchat's actions can be dangerous – the ugly fool

Snap Inc. (NYSE: SNAP) stocks hit new lows this week, and at least two Wall Street professionals believe that the lagging Internet bubble is going even lower. Citi analyst Mark May lowered his price target from $ 8 to $ 7, despite a 44% drop in the stock this year and a 72% drop from the peak of the post-IPO last year. Anthony DiClemente of Evercore ISI will join May for $ 7. His previous prize goal was $ 9.

May and DiClemente experiencing growing pessimism are not unusual. Several Wall Street professionals have either downgraded the title or reduced their price targets in recent weeks. It's also cool to recommend Snapchat's parent company to be on the micro-mail visual and social platform since its application update badly received last year. The title had already hit record lows this week before the two analysts reacted to temper their expectations, but the double dose of negative Wall Street criticism sent stocks below the $ 8 mark for the first time on Thursday.

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May of Citi announces as a problematic trend to growth in the number of users and average revenue per user. The number of daily active users decreased sequentially in the second quarter, from 191 million daily entertaining users in the first quarter of this year to 188 million in the next period. May highlights Snap's forecast in August, suggesting that the daily active user base will continue to contract in the third quarter, which has just ended.

May is also not really afraid of the recent wave of senior executives abandoning the ship. For Snap, Momentum goes the wrong way, and May thinks her peers are too aggressive to gauge the growth prospects of the troubled company as next year approaches. Analysts estimate that revenues will fall to a respectable rate of 37% in 2019. Snap is still up to the liquidity of IPOs, recording nearly $ 1.6 billion in cash at the end of June. However, May estimates that Snap's spending will have to intensify as Snapchat attempts to stop the haemorrhage of the active user, eventually leading to fundraising over the next two years. years.

The DiClemente of Evercore is naturally also concerned about the trend of things. Either way, the third quarter was weak, but as Instagram continues to gnaw on Snapchat's user base, it estimates that Snap's platform has lost a million additional daily users during the third trimester.

It should not be surprising to learn that both analysts have a bearish rating on the stock, but that they are not speech. BTIG analyst Richard Greenfield downgraded his action and set his price target at $ 5 last month. It should not be assumed that May and DiClemente believe that $ 7 will be the lowest price. May himself had lowered his price to $ 8 last month and the lowest revisions would continue until Snap canceled net defeats among daily active users.

Rick Munarriz has no position in the mentioned actions. The Motley Fool owns shares and recommends Facebook. Motley Fool has a disclosure policy.