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Why Snap Shares Fell in July 2017

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Aug. 1 2017, Published 2:10 p.m. ET

Snap’s falling shares

Shares of social media firm Snap (SNAP) fell over 23% in July 2017 to close the month at $13.67. Snap is now trading 4.4% above its all-time low price of $13.1 and 53% below its all-time high price of $29.44.

On July 10, 2017, shares of Snapchat fell below its IPO (initial price offering) price of $17. Last month, Morgan Stanley’s (MS) lead underwriter downgraded Snap from “overweight” to “equal weight.” Morgan Stanley also revised Snap’s 12-month price target from $16 to $12.

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Snap’s shares fell 16% in June 2017, after JPMorgan Chase (JPM) cut the firm’s 12-month price target to $18 from $20. Analysts are raising concerns over Snap’s capability to improve advertising revenue, user base, and profit margins in the competitive social media space where it competes with tech giants like Facebook (FB) and Twitter (TWTR).

At the end of 1Q17, Snapchat had 255 million monthly users—minuscule compared to the 2 billion users on Facebook. But Snapchat has an opportunity to grow its user base exponentially over the next few quarters if the firm can increase user engagement. Analysts expect Snap’s revenue to rise 91% YoY (year-over-year) to ~$1.9 billion in fiscal 2018 from $970.6 million in fiscal 2017.

Snap still trading at a discount to analyst estimates

Although Snap shares have fallen significantly over the past two months, the stock is trading at a discount of 39% to the median analyst target of $19.

Of the 36 analysts covering Snap, 11 have a “buy” recommendation, seven recommend a “sell,” and 18 recommend a “hold.”

In the next part, we’ll look at Seagate’s recent performance.

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