Snap gets a demotion. Blame Meta and Google.

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Snapchat faces tough competition against social media giants like Meta and TikTok. Photograph by Neilson Barnard/Getty Images

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Snap shares fell on Tuesday after an analyst at JMP Securities downgraded shares of Snapchat’s parent company, citing fierce competition for the social media app.

JMP analyst Andrew Boone downgraded shares of Snap (ticker: SNAP) to Market Perform from Outperform on Tuesday with no price target.

Shares of Snap fell 4.5% on Tuesday to $9.36 and were on course for their biggest percentage decline since Dec. 15, according to Dow Jones Market Data.

Snap stock struggled last year, dropping 81% in its worst year on record amid struggles with competition and ad revenue. Boone doesn’t see these issues going away anytime soon for the social media platform.

While we recognize that we are behind with this downgrade, it reflects our preference for Meta (valuation) and Google (search has greater revenue visibility) over Snap, both of which have shorter video products mature, which we believe will attract more user time. the following years, Boone wrote in a research note.

Of the 41 analysts polled by FactSet, nine now say Snap is a buy, 29 say the stock is a hold and three call it a sell.

The competition has been a big challenge for Snapchat as it has had to fight to gain market share from some of the biggest tech giants in the world. Snapchat not only allows users to send photos and videos to each other, but there is an option to display videos on their Discover page.

Meta Platforms (META) has a similar feature for its users called Reels. YouTube, which is owned by Alphabet (GOOGL), also offers users a similar option called YouTube shorts. And then there’s video-sharing platform giant, TikTok, which has become one of the most widely used social media apps in the world.

Time spent in the US with Snapchat fell 7% year over year in the fourth quarter of 2022, as we believe short-form videos from TikTok, Reels and YouTube Shorts are taking up a share of Snapchats Discover time and Stories, Boone wrote.

The stock has potential positive catalysts, however, Boone said. On the one hand, TikTok faces the potential of a US ban due to national security concerns. This ban could potentially drive people to Snap, Boone said, although he thinks people are more likely to go to Meta and YouTube.

Write to Angela Palumbo at [email protected]

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