Sell Snap because competitors are ‘stealing its best ideas,’ Needham says

Share


A man takes a photograph of the front of the New York Stock Exchange with a Snap Inc. banner shortly before the company's IPO, March 2, 2017.
Lucas Jackson | Reuters

Needham initiated coverage on Snap with an underperform rating, citing the competitive threat of rivals copying its innovations.

"We believe SNAP has the most innovative culture on the internet today. The problem is that we believe SNAP shareholders pay in full for its missteps, but don't benefit from the upside of SNAP's genius because competitors can roll out SNAP's best ideas to larger user bases virtually overnight," analyst Laura Martin wrote in a note to clients Monday. "Every time SNAP proves that something works, Google, Instagram, WhatsApp, Facebook and others can copy it."

Snap shares are up 59 percent from its Thursday $17 IPO offering price as of Friday's close.

Martin cited six key reasons for her negative stance:

More In Pro News and Analysis

CNBC ProGoldman, Morgan Stanley and JPMorgan make the case for higher valuations by separating from the pack
CNBC ProMike Santoli’s market notes: Rally out of sideways pause, Netflix reminds us that tech is thriving
CNBC ProJim Chanos is no longer short Tesla, but he's still betting against the stock