Dive Brief:
- Snap Inc. is days into existence as a publicly traded company and is already contending with big fluctuations in its stock price as well as discouraging analyst outlooks, as reported by a number of media outlets, including CNBC and Variety.
- Snapchat’s parent company shares closed down more than 12% yesterday at $23.77. The number is just below the stock's opening price of $24 but above the $17 it was priced at for last week’s IPO. At the markets' open on Tuesday morning, the stock was down more than 7%, hovering around $21.90.
- In separate reporting, Ad Age pointed to an issue that plagues advertisers with spots continuing to appear next to X-rated content on the app.
Dive Insight:
It's not unusual for a highly anticipated initial public offering like Snap's to experience big fluctuations in stock value during its first few months. However, if the stock price continues to move down during the days ahead, this could be an indication that investors are not confident in the platform's ability to drive growth over the long-term. If that happens, it could have a ripple effect, with marketers, publishers and others deciding to take a closer look at partnering with the platform as a result.
Snap’s stock price is down from its all-time high of $29.44, albeit with a sample size of just a few days, but more tellingly CNBC reports that it has yet to receive a “buy” rating from analysts surveyed by FactSet while already being hit with several “sell” ratings.
What's clear is that Snap needs to move quickly to prove Snapchat's value. One analyst, Needham & Co.’s Laura Martin wrote a note to clients outlining her reasoning for rating the stock to “underperform,” including that Snapchat has no path to profitability before 2020, an ad market about 20% the size of Facebook, competitors like who are quickly adopting popular features, and co-founders who control the company while new shareholders don’t have voting rights.
One area where Snapchat needs to focus is doing a better making sure brands have more control over where their ads appear. If ads continue to show up next to X-rated content, some brands are likely to take their business elsewhere.
