What happened

Shares of social network company Snap (NYSE:SNAP) fell as much as 5.3% on Thursday. Shares finished the trading day down 4.1%.

The stock's decline on Thursday extends Snap's double-digit slide on Wednesday as bearish sentiment about the company's worse-than-expected third-quarter earnings release persists. In addition, an analyst downgrade from Morgan Stanley following the earnings release may have made matters worse.

A woman taking a selfie with a smartphone

Image source: Getty Images.

So what

Snap's third-quarter included a number of reasons to be disappointed. Not only were Snap's 178 million daily active users (up 3% sequentially) short of expectations, but revenue was significantly lower than the consensus analyst estimate for the quarter. Revenue was about $208 million. On average, analysts were expecting third-quarter revenue of $239 million.

Disappointed with the quarterly update, Morgan Stanley analyst Brian Nowak said (via CNBC) the results "speak to growing challenges facing SNAP's monetization potential and user opportunity." The analyst lowered his price target for Snap from $14 to $11. Snap finished the trading day at $12.38.

Now what

To help address its underwhelming growth in daily active users and its weaker-than-expected growth in ad revenue, Snap CEO Evan Spiegel said the company is overhauling its app with a redesign. He warned investors that it is a risk, particularly in the near term. But he believes it will pay off over the long haul.