Stocks: Snapchat's Parent Is Fading Out -- WSJ
July 12 2017 - 3:02AM
Dow Jones News
Stock declines anew as a lead underwriter for the IPO trims its
target price for shares
By Corrie Driebusch
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 12, 2017).
Snap Inc.'s rough week continued Tuesday, as a bank that led its
initial public offering slashed its price target for the Snapchat
parent's stock.
Snap shares dropped 8.9% to $15.47 Tuesday. A day prior, shares
fell below their IPO price of $17 for the first time.
The waning confidence in Snap coincides with a stumble by
another recent IPO. In late June, meal-delivery startup Blue Apron
Holdings Inc. struggled to find buyers in its stock offering,
priced its shares below its initial expectations, and has remained
under its IPO price since its second day of trading. Though it
isn't unusual for a newly listed company's stock to fall below its
IPO price, it isn't a great sign for two high-profile IPOs to be
struggling, many traders say.
Snap's decline on Tuesday came as analysts at Morgan Stanley,
one of the lead underwriters on Snap's IPO, downgraded the company
to equal weight from overweight and cut their price target from $28
a share to $16 apiece. Analysts typically assign ratings to
companies they follow that indicate whether they recommend
investors buy, hold or sell the stocks. Morgan Stanley's new rating
suggests holding on to shares of Snap at a price of $16.
The bank cited increasing competition, noting that Facebook
Inc.'s Instagram "has become more aggressive in competing for
Snap's ad dollars." Morgan Stanley added that, as a result, it
expects Snap's ad revenue growth to be "materially slower" than it
previously expected.
Snap shares tumbled in May, after the company reported a
slowdown in user growth for its disappearing-messaging app in its
first quarterly earnings report as a publicly traded company. The
company also reported its revenue in the quarter nearly quadrupled
from a year earlier, but failed to exceed Snap's fourth-quarter
revenue.
Morgan Stanley joins other banks that have now tempered their
enthusiasm for Snap. In March, the average analyst target price was
more than $23 a share, according to FactSet. As of July 11, that
average target price slipped to a little more than $20 apiece.
More volatility could hit Snap shares when restrictions on stock
sales by certain insiders and early investors in the company are
lifted. In late July, more than 600 million shares will be freed up
for sale, according to Dealogic.
Meanwhile, Blue Apron's stock dropped 12% to $7.14 Tuesday,
falling further from its $10 IPO price. The broader U.S. stock
market was mixed Tuesday, with the S&P 500 falling less than
0.1%. The tech sector rose 0.4%.
As of Monday, 46% of U.S.-listed companies that went public in
2017 have closed below their IPO prices at some point. More than
one-third were still below as of then, according to Dealogic.
Another sign investors may be betting against Blue Apron and
Snap: Traders are buying options contracts that tend to pay out on
declines in the underlying stock. Bearish options called puts were
outpacing bullish options, or calls, for both companies on Tuesday,
according to Trade Alert.
Snap was widely seen by analysts, bankers and company executives
as a test of the IPO market for other richly valued firms
considering going public. Private companies largely avoided the
public markets last year because of a winter selloff and
potentially disruptive elections in Europe and the U. S. -- opting
instead to rely on cash from venture-capital investors.
Last year was the slowest for U.S.-listed tech IPOs since 2009
in terms of number of deals and dollars raised, according to
Dealogic data. The money raised by tech IPOs so far in 2017 exceeds
2016's full-year total.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
(END) Dow Jones Newswires
July 12, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Morgan Stanley (NYSE:MS)
Historical Stock Chart
From Aug 2024 to Sep 2024
Morgan Stanley (NYSE:MS)
Historical Stock Chart
From Sep 2023 to Sep 2024