In addition to the business woes that are being faced by Snapchat, the firm is also facing challenges from the outside. Investors and analysts ate the Wall Street are losing confidence and faith in the company as well as in its CEO Evan Spiegel.
Earlier this week, the price target for the shares of the firm was slashed by more than 40 per cent form its already fallen stock price at just a mere $5 by BTIG analyst Richard Greenfield. The recommendation given by him to his investors was to immediately get rid of the shares of Snap – the parent company of Snapchat.
He was “tired of Snapchat’s excuses for missing numbers”, wrote the analyst in his report for the investors.
No more time is intended to be given to the management of the firm by Greenfield to allow the company to devise ways and means to earn some money from the company operations.
The severe rivalry that is being presented by competitors Instagram – owned by Facebook, to Snapchat is the main cause of worry for analysts and investors at Wall Street. Analysts say that despite Snapchat being the first to develop and come out with new features, and Instagram routinely duplicating them, the later has been more successful in not only gaining more users globally with such features but also in monetizing them. This has not bene possible for Snapchat.
While there was a fall of 10 per cent in the stock price of Snap at about $9 a share after the news, the price target for the share was also cut by analysts at Jefferies.
And according to Thomson Reuters Eikon data, the copany shares have been rated as a “buy” by just 7 of the 36 analysts who regularly follow the firm and its performance. On the other hand, while 13 analysts rated Snap as a “sell”, 16 rated the stock as a “hold”.
The cut in the outlook for the stocks and the downgrading of the share price by the analysts followed the exit of another of the high profile executives from the company. The announcement of the departure from the company of chief strategy officer Imran Khan, a former Wall Street analyst, was made by Snapchat earlier in the week.
It was not long ago that a large number of users were irritated and thereby alienated by some controversial changes that were made by the company in its design. That it included some top celebrities such as Kylie Jenner.
Snapchat would find it hard to gain traction, suggested BTIG’s Greenfield. According to him, there is not enough fire power left within the company to stage a turnaround.
“We have been disappointed in Snap’s product evolution (as have users) and see no reason to believe this will change,” he wrote.
Additionally, the rise in a global trend of regulatory bodies attempting to devise stricter regulation of social media companies has is also a cause of worry among investors. There was a fall in shares of Twitter after its CEO Jack Dorsey and Facebook COO Sheryl Sandberg appeared before the US Senate.
(Adapted from Money.CNN.com)