Snap must figure out old people to deserve its rich valuation, said Cantor Fitzgerald analyst Youssef Squali on "Power Lunch."
"I don't think it necessarily resonates with older audiences yet," said Squali. "They need to work on solutions to cater to people not 18 to 24 to become more like Facebook."
Snap, which debuted on the New York Stock Exchange March 2, is currently trading at $20 per share, giving it a valuation of around $24 billion. Plenty of Wall Street analysts believe that the company has yet to justify that valuation.
Facebook was successful because it figured out how to broaden its appeal beyond a small core user base, something Twitter has not yet accomplished, said Squali.
Snap's management has its work cut out to turn Snap from an app into an app platform like Facebook, he said. Squali has a sell rating on Snap's stock and a $18 price target.
"Snap is a great app, it's not a viable app platform just yet," he said.
In a note to investors, Squali warned that Snap still needs to prove itself with advertisers — marketing spend currently falls into the "experimental" bucket — and noted the management team is untested, monetization and user growth have slowed and the competitive landscape is fierce and filled with "fast followers who enjoy greater scale in consumer reach, R&D and brand."
That said, Squali is giving the company the benefit of the doubt, and believes Snap will likely still be independent in five years.
"There's plenty of upside for them to monetize," he said.