Snapchat is best known for making its users’ messages disappear, but parent company Snap Inc. made some of its stockholders’ gains — on paper — vanish as well, as its shares plummeted 12 percent in Monday trading.
The camera-based social network had its initial public offering Thursday, finishing its first day with a 44 percent gain over its offering price of $17 a share. Its positive momentum continued Friday, as Snap closed its first week at $27.09 a share after reaching as high as $29.44.
But with a weekend to think about things — and several bearish analyst reports to read — investors reversed course, pushing Snap’s shares down more than 10 percent during much the day before falling again right before the market close, finishing at $23.82 a share.
Needham & Company analyst Laura Martin set a target price of between $19 and $23 a share for Snap, slightly north of its IPO price. Martin, who was far from the most bearish Snap analyst — Pivotal Research’s Brian Wieser slapped a $10 price target on it — called the company a “lottery-like stock” in a Monday research note.
In her note, Martin argued that Snap’s total addressable market is about 80 percent smaller than Facebook, the company has already tapped about half that market and that it has no defense to prevent “fast followers” — like Facebook’s Instagram stories — from encroaching on its territory.