Snap Inc (NYSE:SNAP) had a solid run in the first two days of its debut on the NYSE. However, the stock started suffering losses to close below the opening price on Monday. This triggers several questions. One among them is the valuation of the company, which, most of the analysts, believe is expensive compared to rivals.
Until now, the highest price target set by different analysts is $22 while the lowest price target is $10. Both the price objective suggests that the stock presents only downside risks and there is no upside potentials in the near-term or at least until any new catalysts emerge.
A few days back, there was report that regarded Snap as the most expensive IPO than any other technology firms until now. The pricing of $17 a share gave a valuation of about $23.8 billion. Fortune’s Lucinda Shen has analyzed the valuation in comparison with revenue. Accordingly, Snap’s valuation in relation to $404.5 million revenue gave a ratio of 58.8. This is sharply higher than even Twitter Inc (NYSE:TWTR) that enjoyed 44.8 times while Facebook Inc (NASDAQ:FB)’s had only 28 times. The least ratio was recorded by Microsoft Corporation (NASDAQ:MSFT) with 3.7.
The following brokerages have initiated their rating on Snap shares:
- S&P Capital IQ initiated with a Sell rating and price target of $22 on Snap shares.
- Needham initiated with an Underperform rating.
- Aegis Capital stated with a Hold rating and a price target of $22 on the stock.
- Pivotal Research Group commenced with a Sell rating and kept a price objective of $10 on Snap stock.
- Nomura initiated with a Reduce rating and a target price of $16
- Susquehanna commenced with a Neutral rating with a price target of $22.
Significantly, there is no analyst to recommend a Buy rating on the stock. On the other hand, at least four analysts’ have recommended a Sell rating while two analysts have a recommendation of Hold rating. This suggested that there are more downside risks than any upside potentials. Therefore, it would not be a surprise if the stock continued to face selling pressure.