Shap Inc. (NYSE:SNAP) shares have received a much-needed lift today by a Stifel upgrade to ‘buy’ from ‘hold’, after its stock fell well below its initial public offering price.
Stifel analyst Scott Devitt said in a note to investors that fears about mounting competition from Facebook-owned Instagram were overblown.
“Competition from Instagram remains a chief concern for investors, though recent app download trends appear healthy in key ad markets, leading us to believe near-term risks to revenue-generating [daily active users] may be overstated,” he said.
“Despite concerns in the market and persistent comparisons to Twitter, we believe Snap's business remains on track fundamentally as it continues to develop innovative consumer products and increasingly sophisticated tools for advertisers.”
Shares in the owner of Snapchat rose 2.62% to US$15.64 in US pre-market trading after reaching a record low of US$15.21 yesterday on the back of a Morgan Stanley downgrade.
Morgan Stanley, which took Snap public on 2 March, cut its rating to ‘equal weight’ from ‘overweight’ and lowered the price target to US$16 from US$28 yesterday. It said Snap’s ad product was not evolving or improving as quickly as it had expected and Instagram competition is increasing.
Such worries about competition from its photo-sharing rival sent Snap’s shares below the IPO price for the first time on Monday.
In May, Facebook revealed that Instagram Stories had 200 million daily active users, compared to Snap’s million daily active users.