Snap Inc. (NYSE:SNAP) shares are hitting new lows this week, and at least two Wall Street pros feel that the dot-com laggard is going even lower. Citi analyst Mark May is lowering his price target from $8 to $7, despite the stock falling 44% this year and trading 72% lower since last year's post-IPO high. Evercore ISI's Anthony DiClemente is joining May at the $7 price point. His previous price goal was $9.

May and DiClemente experiencing deepening pessimism isn't unusual. Several Wall Street pros either downgraded the stock or slashed their price targets in recent weeks. It's as cool to recommend Snapchat's parent company as it is to be on the social visual micro-messaging platform since its poorly received app update late last year. The stock was already hitting lifetime lows this week before the two analysts stepped up to temper their expectations, but the double dose of negative Wall Street reviews is sending the shares below $8 for the first time on Thursday. 

Snap's Spectacles watching a skateboarder doing tricks.

Image source: Snap, Inc.


Citi's May sees problematic recent trends in user and average revenue per user growth. Daily active users declined sequentially during the second quarter, as Snapchat went from entertaining 191 million daily active users in the first quarter of this year to 188 million in the following period. May points to Snap's guidance back in August, suggesting that the daily active user base wil continue to contract in the recently concluded third quarter.

May also isn't exactly tickled about the recent wave of key executives abandoning ship. Momentum is going the wrong way for Snap, and May feels that his peers are being too aggressive in sizing up the out-of-favor company's growth prospects heading into next year. Analysts see revenue decelerating to a still-respectable 37% clip in 2019. Snap is still flush with IPO cash, checking in with nearly $1.6 billion in cash as of the end of June. However, May feels that Snap's spending will need to intensify as Snapchat tries to stop the active user bleeding, leading it to possibly raise capital in the next year or two.  

Evercore's DiClemente is naturally also concerned about the way things are trending. The third quarter has been seasonally weak anyway, but with Instagram continuing to eat away at Snapchat's user base he estimates that Snap's platform lost a million more daily active users during the third quarter.

It shouldn't come as a surprise to learn that both analysts have bearish ratings on the stock, but they aren't the floor. BTIG analyst Richard Greenfield downgraded the stock and dropped his price target to $5 last month. One also shouldn't assume that May and DiClemente believe $7 will be the bottom. May himself had lowered his price to $8 just last month, and the lower revisions will likely continue until or unless Snap reverses the net defections in daily active users. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.