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Why Did Snap Stock Fall Again Today?

Shares of Snap Inc. SNAP are moving lower again on Tuesday, just a day after the embattled social media stock fell below its $17 per share IPO price for the first time. Today’s slump comes as analysts from Morgan Stanley downgraded SNAP and lowered their revenue forecast for the company.

“SNAP's ad product is not evolving/improving as quickly as we expected and Instagram competition is increasing,” Morgan Stanley analyst Brian Nowak said in a note. “We have been wrong about SNAP's ability to innovate and improve its ad product this year … as it works to move beyond 'experimental' ad budgets into larger branded and direct response ad allocations.”

Nowak and his team downgraded the stock to “equal weight” from “overweight” and cut their price target to $16 from $28. The analysts also updated their revenue forecasts for Snap to reflect a new belief that the company would not be profitable through at least 2020.

Following this updated call, Snap shares opened nearly 4% down and eventually fell as low as $15.84—a decline of about 6.8% from Monday’s close—in morning trading.

Analyst coverage has slowly gotten worse for Snap, which held its highly-anticipated IPO just a few months ago. According to TipRanks, 18 analysts currently have SNAP labeled a hold or sell, while just 11 are calling the stock a buy right now.

As Nowak mentioned, the pressure from Snap’s competitors has slowly mounted since the company’s market debut. For example, social media behemoth Facebook FB now has Snapchat-esque, 24-hour “story” modes on all of its platforms, including its popular photo-sharing app Instagram.

“We believe Instagram is likely to be more disruptive than previously expected as our industry conversations indicate that Instagram is giving advertisers sponsored lenses for free,” wrote Nowak.

For now, Snap remains a Zacks Rank #4 (Sell). The stock is also sporting an “F” grade for Value and a “D” grade for Growth in our Style Scores system.

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