Decelerating growth and souring analysts will scare away growth stock investors, and the uncertainties of a disruptor getting disrupted make it a hard steak knife to catch when it's falling. Shares of Snap hit a new all-time low on Friday, something that naturally isn't saying much since the stock's only been trading publicly since hitting the market in early March. However, the shares have fallen every month in its brief public tenure. The stock is currently trading nearly 14% lower in August, so that unfortunate losing streak is unlikely to end this month.
That sinking feeling
Revenue more than doubled -- up 153% to $181.67 million -- but analysts were holding out for a 164% surge on the top line. Snap's adjusted loss of $0.16 a share was also slightly worse than the $0.15-a-share deficit that Wall Street pros were targeting.
Snapchat closed out the quarter with 173 million daily active users, a mere 21% year-over-year advance and just 7.3 million or 4% more than it had when the period began. Revenue is growing a lot faster than Snapchat's audience. Average revenue per user has more than doubled over the past year as a testament to Snap's improving monetization skills. However, with Facebook's (NASDAQ:FB) Instagram surpassing Snapchat's platform earlier this year when it came to daily active users, investors are dwelling on slowing user growth and engagement trends.
Several analysts scaled back their expectations for the company that went public at $17 five months ago. Samuel Kemp at Piper Jaffray lowered his price target from $16.50 to $12.50, arguing that Snap continues to lose market share to Instagram. Kemp also points out that monetization is lagging expectations in North America.
Ross Sandler at Barclays reduced his price goal from $18 to $13. He was somewhat comforted by the upbeat tone during the earnings call, but it's hard to suggest near-term upside after Snap fell short of market expectations on both ends of the income statement.
Brian Fitzgerald at Jefferies nearly shaved his price target in half, going from $30 to $16 last week. It was disappointing to see Snap fall short of expectations, just as it did in its first quarterly report as a public company three months earlier. He still sees a long-term opportunity, but Jefferies joins Sandler and other analysts in lowering their price goals below March's IPO price of $17.
There are still some analysts perched above $17, but the consensus seems to be that Snap stock will continue to trade as a busted IPO in the near term. With Facebook quickly copying what works at Snapchat and usage growth decelerating, Snap remains a risky investment even after its sorry streak of monthly declines.