Snapchat Shares Slump Following Morgan Stanley Downgrade
Shares of Snapchat’s parent company Snap Inc slumped for the second consecutive session on Tuesday after the lead underwriter of its initial public offering Morgan Stanley downgraded its rating on the technology stock.
The stock’s price dipped below its initial public offering price of $17 for the first time during Monday’s session. It fell by another 5.6% on Tuesday’s trading session following Morgan Stanley’s downgrade due to growing concerns regarding the social media application company’s capability to attract user growth and compete with Instagram.
Snap’s shares rose by 45% during its IPO and recorded a market value of $48 billion compared to their previous expectations of recording around $22 to $25 billion.
Snapchat experienced a slump in the daily downloads of the application a few months ago according to independent research while its daily active users have lagged by around 166 million compared to Facebook-owned Instagram daily users of more than 500 million every day.
Snap Inc also delivered $2.2 billion in losses coming from their IPO launch expenses although they were able to deliver considerably higher revenues at $149.65 million compared to their revenue of $38.8 million for the same quarter last year.
Despite this, the company missed consensus analysts estimates of $158 million in revenue. Their operating expenses also bubbled by $196 million during the quarter.
By the time of the company’s first earnings release as a public company, Snap’s shares have slumped by more than 20% and has declined below the $18 price.
The company has originally warned investors that its shares will not be able to offer profitability during the early stages of the IPO. However, Morgan Stanley’s most recent downgrade has raised concerns even further to whether where the company is headed. Morgan Stanley downgraded its rating on Snap Inc from outperform to equal weight and cut its price target from $28 to $16.
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