Day 3 for Snap: The selloff begins

Day 3 for Snap, Inc. on Wall Street wasn't as rosy as the first two.

The newly issued stock declined 12.26% to close at $23.77, hovering under its opening day price of $24. That erased nearly all of the last two days of gains, when investors — eager for a slice of what they hoped would be the next Facebook — bought into shares after the IPO.

In the run-up to the $3.4 billion sale, the biggest U.S. tech IPO since Alibaba in 2014, the Venice, Calif. social messaging company had told told investors it lost $514 million last year, on sales of $400 million, and that profits could be way down the line. Analysts started picking up on that.

According to CNBC, five of the seven analysts covering Snap recommending selling, to just two that have "hold" recommendations.

"While we believe the firm has displayed a network effect among its users and has begun to compile valuable user data, or intangible assets, we are not yet convinced that it will effectively monetize those users in order to generate excess return on capital for at least 10 years," said Morningstar analyst Ali Mogharabi

Scott Kessler, an analyst with CFRA Research, offered a "sell" recommendation Monday, with $22 as the price target for the stock. "We see strong user engagement, but user growth that has decelerated," he said, in a note to investors.

Of the up and down pricing for Snap over three days of trading, Kessler notes "there will be a lot of volatility for this stock."

Pivotal Research analyst Brian Wieser went even further, suggesting last week that $10 was the appropriate price for the stock, below the IPO price of $17. He called Snap "significantly overvalued," in a note to investors.

Many firms involved in the underwriting of the IPO, who would normally be available to offer "buy" recommendations, are precluded from talking about Snap in the initial IPO period.

THIS REPORT BY ME  ( SURAJ)