Why are Snap Shares Sinking Today?

On Friday, shares of Snapchat parent company Snap Inc. SNAP are sinking, down about 4.5% in morning trading after analysts at Citi downgraded the stock, citing user growth and monetization concerns.

Citi analyst Mark May lowered its rating on Snap to Neutral from Buy, as well as lowered his price target to $20 from $24, which represented a 6% upside from Thursday's closing price.

The company's "pace of growth in monetization (including the contribution from new channels such as self-serve) may not be as fast as we had originally modeled in 2H17 due, in part, to a slower than expected roll-out of these new channels/platforms," wrote May in a note to clients.

"Given continued Android issues, summer seasonality, heightened competition and the nature of Snap's social network, we expect user growth will remain modest near term," he continued.

May also reduced his daily active users net adds for Snap to 9 million from 12 million for the second-quarter, in addition to lowering his fiscal 2018 earnings per share estimates to a loss of 46 cents from a loss of 42 cents.

While its IPO was successful, Snap's shares have struggled since then. Facebook's FB Instagram platform has rolled out continuous updates to Stories, its Snapchat clone that has surged in popularity recently. Coupled with disappointing first-quarter earnings results, many investors are wondering what's next for Snap.

Currently, SNAP is a #3 (Hold) on the Zacks Rank, with a VGM score of ‘F.' Since its IPO, Snap shares are down 23%.

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