JPMorgan cut its 2017 share price target for Snap from $20 to $18 on Monday, sending shares lower by more than 2 percent.
In a note to investors, JPMorgan maintained its neutral rating for the parent of social media site Snapchat.
While "engagement is strong" on the site, JPMorgan said it has several concerns, including the company's ability to scale its advertising business. It also said it's less bullish on Snapchat's ability to add users, fears competition from Facebook and is concerned about Snapchat's lack of profit. JPMorgan said it doesn't expect Snap to post a profit until 2020.
Snap's first earnings report last month failed to meet Wall Street's revenue estimates — despite increasing revenue from $38.8 million to $150 million year over year. It also reported a loss of $2.31 a share, sending the stock tumbling to just cents above its $17 IPO price. On Monday, it was trading at $20.66.
JPMorgan also said it is more conservative on the future of Spectacles, Snapchat's smart sunglasses. JPMorgan revised its expected unit sales of Spectacles to around 429,000 in 2017, driving about $56 million in revenue, compared with original projections of 915,000 units and $119 million in revenue.
Finally, the investor note warned that Snap's expiring share lockup on July 29 "could create greater volatility and weigh on Snap shares ahead of and after late July" when an estimated 70-80 percent of Snap shares open up for sale.
Disclosure: NBC Universal, the parent company of CNBC, is an investor in Snap.
Correction: This story was revised to correct that the JPMorgan note was sent Monday.