When Snap Inc. (SNAP) made its public debut last Thursday, Wall Street's roaring enthusiasm for the fast-growing tech company catapulted the stock 44% higher.
That enthusiasm now appears to be fizzling out as shares of Snapchat's parent company fell almost 10% to $21.44 on Tuesday, after falling 12% on Monday to below its opening price of $24 per share.
And while it's not unheard of for recently listed tech companies to falter in their first few weeks of trading (Facebook's (FB) stock fell below its $42 opening price in the second day of trading after its 2014 IPO), Snap's stock performance does little to quiet the voices of those who have become bearish about its growth prospects. Of the eight analysts that currently cover Snap, none of them have a Buy rating on it and two have a Sell rating, according to FactSet.
Bearish analysts have argued that Snap is overvalued for a company that has yet to turn a profit, may continue seeing decelerating user growth and is weighed down by cloud service costs. These concerns are likely playing a part in the stock's recent decline, said Aegis Capital analyst Victor Anthony, who has a Hold rating and $22 price target on shares of Snap.
App tracking data shows that Snap's daily active user (DAU) growth fell in the first two months of the fiscal 2017 first quarter, Anthony said, demonstrating that Facebook's Instagram is a persistent threat to the disappearing message app.
Facebook launched Instagram Stories last August, a near copycat of Snapchat Stories that allows users to post photos and videos lasting for up to 24 hours. Like Snapchat Stories, Instagram Stories incorporate unique geofilters, lenses and stickers to personalize posts.