What happened

Shares of photo- and video-sharing social network Snap (NYSE:SNAP) were crushed on Friday, falling as much as 17.5%. The stock finished the trading day down about 10%.

The stock's decline follows the company's third-quarter earnings release, which was posted after the market closed on Thursday. Though Snap's revenue and loss per share for the quarter were better than consensus analyst estimates, the company's second quarter in a row of declining daily active users and an analyst downgrade for the stock on Friday may be worrying investors.

The words, Snap Inc, on a yellow background

Image source: Snap.

So what

Snap reported revenue of $298 million, up 43% year over year. On average, analysts were expecting revenue of $283.2 million. The company's non-GAAP loss per share was $0.12, narrower than a $0.14 non-GAAP loss per share in the year-ago quarter. This loss was also narrower than a consensus analyst forecast for a loss of $0.14.

Daily active users were up 5% year over year -- at 186 million. But these users were down 1% sequentially. Further, management warned the app will likely see a further decline in users in Q4, too. 

After the results, J.P. Morgan analysts downgraded the stock from "neutral" to "underweight." In addition, the analysts cut their price target for the stock in half, from $12 to $6. 

Now what

Snap forecast fourth-quarter revenue between $355 million and $380 million, representing 24% to 33% year-over-year revenue growth. That would mark a significant deceleration from Snap's 43% revenue growth in Q3.

J.P. Morgan analysts said in a note to investors (via CNBC) about their lower price target for the stock that they believe Facebook and Instagram will "continue to attract incremental ad dollars in the social media space, making it difficult for Snap to gain meaningful market share."

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