Why Nomura Initiated Snap At Reduce With A $16 Price Target

On March 1, Snap Inc SNAP started selling its stock on the public stock market, with an IPO price of $17 per share. Snap’s user growth and monetization growth rates are beginning to “meaningfully slow,” and there seems to be limited upside to the stock, Nomura’s Anthony DiClemente said in a report.

DiClemente initiated coverage of Snap with a Reduce rating and a price target of $16. The EPS estimates for FY 2017 and 2018 are at ($0.34) and ($0.14), respectively.

Related Link: The Road Ahead For Snap: What Does It Mean To Be A Camera Company?

Limited Upside

The analyst mentioned the following reasons for believing there’s limited upside to Snap’s share price:

• Already decelerating growth in DAUs (daily active users).
• Decelerating monetization, or ARPU (average revenue per user), growth.
• Stiff competition from larger rivals such as Facebook Inc FB, Instagram and WhatsApp.
• Premium valuation compared to current and future growth.

“We see Snap’s opportunity as constrained relative to expectations and, as such, we think shares are fairly valued at best at the IPO price,” DiClemente commented.