Snap shares fall below IPO price as Morgan Stanley cuts rating

Snap Inc. has been slapped again — this time by the big Wall Street bank that underwrote its public stock debut.

Shares of Snapchat’s parent company fell to fresh all-time lows on Tuesday after Morgan Stanley — which led the Snapchat parent’s IPO in March — cut its rating on the stock to equal weight from overweight and slashed its price target to $16 from $28.

Snap shares, trading under the ticker symbol “SNAP,” hit an all-time low of $15.84 in mid-morning trades, and recently were changing hands at $16, down 5.8 percent.

The early Tuesday downgrade came a day after Snap shares closed below their IPO price of $17 for the first time amid growing concerns about slowing user growth, the company’s ability to compete with Facebook’s Instagram app, and a lockup of employee shares that expires at the end of the month.

“SNAP’s ad product is not evolving/improving as quickly as we expected and Instagram competition is increasing,” Morgan Stanley analyst Brian Nowak said in a Tuesday research note to clients.

“We have been wrong about SNAP’s ability to innovate and improve its ad product this year,” Nowak added, referring to the company’s ability to improve the scalability, targeting and measurability of Snapchat’s app for the sake of advertisers.

That, in turn, could hamper Snap’s ability to “move beyond ‘experimental’ ad budgets into larger branded and direct response ad allocations,” the analyst added.

Morgan Stanley cut its estimates for Snap’s 2017 revenue by 6.9 percent to $897 million, and daily active user expectations by 1.6 percent to 182 million.

Goldman Sachs, another lead underwriter, still has a “buy” and an unchanged $27 price target.

Up to Monday’s close, Snap has lost about 42 percent since its early highs after its IPO.