Snap Shares Fall 5.6% after Downgrade from Morgan Stanley

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Shares of Snap dropped 5.6% this week, post Morgan Stanley, the lead underwriter, downgraded the stock. He also lifted concerns about the ability to compete of the social media company in opposition to competitor Instagram.

Snap stakes were dealing at $16.04, after ending under its $17 IPO cost for the first time in history. The market debut of Snapchat owner in March was the hottest technology listing in the U.S. in years. The downgrade comes at the forefront of the ending of the lock-up period of the stock this month.

Snap Shares Fall 5.6% after Downgrade from Morgan Stanley

In a strange move for a lead underwriter, Morgan Stanley slashed its cost target from $28 to $16. It also slashed its rating on the Snapchat parent from “outperform” to “equal-weight”. The brokerage’s cost target now sits under median price target of $19.50 of Snap. Dropping under an IPO cost is seen as a setback on Wall Street and is to be prevented from underwriters and chief executives. But, it is common for Silicon Valley firms.

Snapchat has achieved fame amongst people below the age of 30, but most of them on Wall Street have been serious of slowing user growth and lofty valuation of Snap. The company encounters rising competition from Facebook, which at one time prepared a $3 Billion proposal for Snapchat. The social media major has turned the camera a major piece of its apps and provides features analogous to Snap on its platforms, comprising WhatsApp and Instagram.

In June 2107, Instagram claimed that its “Stories” feature got a user base of 250 Million users, in opposition to 166 Million users for Snapchat at the close of quarter one. Apart from growing rivalry from Instagram, Morgan Stanley also claimed that user growth drifts have been humbly lower than anticipated. “We have been so not right about the ability of Snap to improve and innovate its ad product in 2017,” Nowak claimed to the media in a statement.

Morgan Stanley slashed his approximations for 2017 revenue of Snap to $897 Million by 6.9%, and everyday active user approximations to 182 Million by 1.6%. Another lead underwriter still has an untouched $27 cost target.