Shares of Snap Inc. (NYSE:SNAP) closed nearly 7% lower on Tuesday after Citigroup (NYSE:C) analysts downgraded the social media stock on the back of a controversial new update that has left many users unhappy.
Citigroup’s Mark May downgraded Snap to “sell” from “hold” and lowered his price target to $14 from $18, which would represent a slide of more than 31% from last week’s close. May cited a “significant jump” in negative reviews following Snapchat’s major redesign—a trend which he says could hurt the stock if it impacts user growth and user engagement.
Snap’s app overhaul and subsequent criticism from users comes shortly after many Wall Street hoped that the young company had reached a turning point. Earlier this month, shares skyrocketed nearly 50% in just one trading period in the wake of the company’s better-than-expected earnings report.
Snap reported an adjusted loss of 13 cents per share in the fourth quarter, coming in ahead of our consensus estimate that called for a loss of 15 cents per share and improving from its 19 cents-per-share loss in the year-ago period.
Evan Spiegel’s company also posted total revenues of $285.7 million, up about 72% year-over-year. Snapchat added about 28.8 million daily active users in the quarter, lifting its total 18% to touch 187 million.
But the app’s new design reorganizes the platform in a way that users are largely unfamiliar with, largely abandoning a basic structure that has been in place for years. If this new style fails to resonate with Snapchat’s most-loyal users, the company’s first impressive quarter might just be its last.
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