Snap (SNAP) stock is now down by about 16% after a volatile initial public offering that sent shares skyrocketing 40% and then tanking just a few days later. Most analysts are bearish on the Snapchat parent company and rate its stock as a Sell or equivalent. Among the problems that have Wall Street up in arms are the lack of voting rights attached to Snap stock, management’s inexperience, the high valuation, slowing user growth, growing competition, and the unproven business model, just to name a few.
Snap stock upgraded to Neutral
Interestingly, the Snapchat parent company has already managed to convince one analyst to upgrade its stock. CFRA Research analyst Scott Kessler said in a research note issue that although he predicts “considerable growth” for Snap, he still sees several problems with it. He upgraded Snap stock from Sell to Hold and set a generous price target of $22 per share, reports CNBC.
The issues he named are pretty much the same problems everyone else has with the company, including the lack of any kind of corporate governance, as the messaging firm’s earliest founders hold 89% of the voting rights. He’s also concerned about competition, especially from Facebook (FB) and Facebook-owned Instagram, both of which have copied Snapchat’s most well-known features without any apparent consequences.
Initiating coverage of Snap stock at Underweight
Cantor Fitzgerald analyst Youssef Squali initiated coverage of Snap stock in a note on March 14 with an Underweight rating and $18 price target. He said he finds the company’s valuation “rich under most scenarios,” adding that he just can’t make the numbers match up. He said even his revenue and profitability growth estimates are “aggressive” and assume that revenues will ramp over the next five years in a manner similar to what happened with Facebook. If that actually happens, he said it would be “impressive.”
