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Opinion: Analysts Should Stop Comparing Snap IPO To Facebook, Stay Short Into Lock-Up Expiration

Opinion: Analysts Should Stop Comparing Snap IPO To Facebook, Stay Short Into Lock-Up Expiration

Digiday, the bible for digital media publications, recently suggested publishers are switching affections from Snapchat to Instagram:

“The death knell for Snapchat was Instagram Stories,” said David Pierpont, vice president of performance media for Ansira, a digital ad agency with more than 100 clients, referring to Facebook’s video-sharing feature which launched in August 2016.

“When we saw that, we said, ‘It’s over,'” Pierpont told CNBC in a phone interview

Rather than try to catch the bottom on Snap, investors would be wise to either sell Snap stock, short the stock, or stay on the sidelines and do nothing. The biggest risk we see to shorting Snap is that a buyer shows up and catches the falling knife. Outside of an acquisition, it is a strong probability Snap could fall another 30-to-50 percent before bottoming.

Wall Street bankers have done the hard work of hyping the shiny-new-thing IPO to investors who are largely ignorant about the media and advertising industries. Investors who were locked into the hype with restrictions are now ready to sell and sell hard.

Morgan Stanley has already started backing away from their IPO hype, reducing their Snap rating, Fortune reported:

According to the note, Morgan Stanley analysts led by Brian Nowak are now less convinced of Snap’s ability to grow. In fact, the analysts effectively refuted the main reasons why Snap’s biggest champions believed in the company at all: its apparent scalability and unique platform.

“We have been wrong about Snap’s ability to innovate and improve its ad product this year (improving scalability, targeting, measurability, etc.) and user monetization,” Nowak wrote. “Snap’s ad product is not evolving/improving as quickly as we expected and Instagram competition is increasing…

“We believe Instagram has become more aggressive in competing for Snap’s ad dollars,” Nowak wrote.