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Why One Analyst Thinks Snap Could Be in Trouble Very Soon

Chris Lange

Published: April 10, 2019 12:50 pm

Last Updated: January 11, 2020 9:21 am

Snap Inc. (NYSE: SNAP) shares dipped on Wednesday after one research firm came out against the stock, issuing a “significant” downgrade. eMarketer believes that this stock is vastly overvalued and that the growth outlook for Snapchat’s U.S. social usage is questionable.

eMarketer believes Snapchat will lose monthly users in the United States this year for the first time. Growth is expected to flatten out and plateau in 2020.

Ultimately, eMarketer expects to see Snapchat’s U.S. users hitting 77.5 million this year, a decrease of 2.8% year over year. Previously, the firm expected 90.4 million U.S. users in 2019, when it made its last prediction in the third quarter of 2018.

As a result, eMarketer has significantly downgraded its growth outlook for Snapchat in its latest U.S. social usage forecast.

Jasmine Enberg, eMarketer senior analyst, commented:

Increased competition from new and existing social platforms is partly to blame for Snapchat’s decline. But the product launches the company announced last week, including an in-app gaming platform, may improve user engagement and time spent, particularly among its core young user base. Gaming also provides a new revenue stream for Snapchat that could boost its ad business in the future.

Shares of Snap were last seen down about 5% at $11.71, in a 52-week range of $4.82 to $15.96. The consensus price target is $9.42.