Snap, the parent company of Snapchat, has dropped back to its IPO price of $17 after an initial surge in March.
Snap Inc. jumped to $24.48 after its first day on the market, putting its market capitalization at about $33 billion, roughly on the same footing as Marriot and Target, stated CNBC.
The instant messaging and photo application then reported tepid growth in the initial quarterly earnings report as a public company in early May. Snap also posted a $515 million loss last year.
Anthony DiClemente, an analyst with Nomura, told Fox Business last week that data from SensorTower spotted deterioration in Snapchat downloads from a year ago while Instagram downloads had grown. Instagram, which is owned by Facebook, recently started rolling out copycat features to aggressively compete with Snapchat.
"We do not believe that monetization growth will reaccelerate in the near term as management has identified seasonality in the business," DiClemente said, per Fox Business. "We see these dynamics as possibly exacerbating the impact of the expiration of the stock’s lockup period in August."
Recode stated while the drop means that those who snapped up Snap in the days before it went public are now back to even on their deal, it does not mean the investment will fail.
"There doesn't appear to be any particular catalyst for Thursday’s stock dip, but people are concerned about Snap's user growth and weren't thrilled with its (first quarter) revenue, which came in below analyst estimates," stated Recode writer Kurt Wagner.
"This doesn’t mean Snap is necessarily doomed. Facebook stock, if you will remember, spent its entire first year on the public markets hovering below its IPO price. It’s now worth almost four times its IPO price," Wagner continued.
CNBC wrote that several analysts' sell ratings have become concerned about Snap's longevity. The network projects Snap's stock will battle more price pressure when 1.2 billion shares become available for sales by the end of next month.
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