Snap’s ‘ridiculously valued’ shares are getting hammered

BILLIONS of dollars have been wiped from Snap Inc’s shares as the shine wears off the tech company’s share market debut.

SNAP Inc’s initial stock gains just disappeared like a racy photo on Snapchat.

Shares of the red-hot app operator — co-founded by 26-year-old wunderkind Evan Spiegel — tumbled more than 12 per cent to close at $US23.77 on Monday, the New York Post reports.

That was below their initial pricing at $US24 last Thursday in a splashy debut on the New York Stock Exchange.

Since then, bearish calls have continued to pile in from Wall Street analysts, who fret over the company’s market value given its skimpy sales and mounting losses.

Needham analyst Laura Martin called Snap a “lottery-like stock” as she initiated coverage on Monday with the equivalent of a sell rating.

Snap’s total addressable market is 80 per cent smaller than Facebook’s, Martin calculates, and Snap’s revenue forecast looks difficult to achieve.

Over the weekend, Barron’s published a blistering piece on Snap, calling it “ridiculously valued” at its Friday closing price of $27 a share, which gave it a market capitalisation of $37.8 billion.

At that price, the stock was trading at 93 times its 2016 revenue of $405 million, Barron’s noted. Snap isn’t expected to be profitable until 2019 or 2020.

None of the seven analysts who cover Snap have given it a buy rating, according to Bloomberg.

Nomura/Instinet analyst Anthony DiClemente, who began coverage of Snap with a Reduce rating and a $16 target, cited four worries: slowing user growth, slowing growth in monetisation of users, fierce competition from Facebook, and a “rich valuation relative to current and future growth.”

Bulls on Snap shares argue the app is favoured by teens that advertisers can’t reach with TV.

This article first appeared at the New York Post and is reproduced here with permission.