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Pro Analysis

Snap just got a downgrade on Wall Street after one day of trading

A banner for Snap Inc. hangs on the facade of the the New York Stock Exchange on the eve of the company's IPO in New York.
Brendan McDermid | Reuters
A banner for Snap Inc. hangs on the facade of the the New York Stock Exchange on the eve of the company's IPO in New York.

Atlantic Equities, a small London-based brokerage firm, downgraded Snap a day after the social-media company went public.

Atlantic downgraded Snap to underweight from neutral on Friday, telling investor to avoid the stock as valuations following its initial public offering may be "unsustainable."

"At current levels the stock is trading at a premium to Facebook after normalising for engagement levels. This seems unsustainable given Snap's unproven monetisation potential, structurally lower profitability and likely challenges in materially reaccelerating user growth," equity analyst James Cordwell wrote in a research note.

The research firm made the unusual move of rating Snap before it went public. A few firms initiated coverage Thursday, but most will wait before putting out significant research on the new company. Many of the bigger banks, which were involved in the underwriting of Snap, are barred from putting out any research on the new stock for a period of time.