Wall Street demolishes Snap in a brutal round of notes this morning

Key Points
  • Wall Street analysts are disappointed with Snap's third-quarter earnings results.
  • "The revenue shortfall against expectations and (management) commentary implies that (management) likely has much less visibility into the business than we thought," an RBC Capital Markets' internet analyst says.
Top tech analyst Mark Mahaney breaks down why he downgraded Snap shares

Wall Street is buzzing over Snap's poor financial results and blasting the company for its weak performance.

The social media company reported worse-than-expected third-quarter results Tuesday. Its sales and daily active users fell short of Wall Street expectations.

"In the first two quarters as a public company, we framed SNAP's disappointing results as 'growing pains' but felt the long-term debates around user growth and ad business scaling were left unsolved," UBS analyst Eric Sheridan wrote in a note to clients Wednesday entitled "SNAP Crackle Flop."

"It is now very likely that SNAP will continue to struggle on multiple fronts in the coming 12 months."

The company's shares were down more than 15 percent midmorning Wednesday. The stock whipsawed higher and lower in premarket trading after it was revealed that Chinese internet giant Tencent has taken a 10 percent stake in the company, according to a regulatory filing.

Sheridan lowered his rating to sell from neutral and reduced his price target for Snap shares to $7 from $12.

RBC Capital Markets doesn't see any turnaround in Snap's business, either.

"We initiated with an outperform when the stock was at $24. We have had the wrong call," analyst Mark Mahaney wrote Tuesday. "The revenue shortfall against expectations and (management) commentary implies that (management) likely has much less visibility into the business than we thought. ... We believe visibility from here is poor."

Mahaney lowered his rating to sector perform from outperform and reduced his price target to $15 from $20.

Piper Jaffray also pointedly criticized the company's management and execution.

"Snap's (management) team is showing considerable fluidity in how it is managing its business and we believe this reflects poor leadership under a corporate governance structure that lacks accountability for senior executives," analyst Sam Kemp wrote Wednesday. "Longer-term we believe Snap is structurally challenged."

Kemp maintained his neutral rating and $12.50 price target for Snap shares.

Stifel's Scott Devitt also downgraded his rating on the company to hold from buy, saying "we find significant upside to current valuation difficult to justify given the trajectory of the business."

Snap did not immediately respond to a request for comment.

Disclosure: CNBC parent NBCUniversal is an investor in Snap.