Snap stock continued to get pounded on Thursday due to fallout from the 3Q17 earnings release, which was posted on Tuesday. Bearish sentiment has ruled over the Snapchat parent since its initial public offering earlier this year, but it seems that even the few holdouts are starting to lose hope that it will ever get things together. For Snap monetization is becoming a huge issue even though bulls remain convinced that Snapchat’s hard-to-reach Millennial userbase is a goldmine of opportunity.

Snap monetization
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Snap monetization challenges trigger multiple downgrades

Analysts from Morgan Stanley, Stifel and Credit Suisse downgraded Snap stock due to monetization issues. Morgan Stanley analyst Brian Nowak said in his post-earnings note on Snap stock that he’s cut his rating from Equal-weight to Underweight and slashed his price target from $14 to $11.

According to Nowak, the Snap monetization potential is up against a growing number of challenges. He also sees a number of “structural hurdles” to the social media firm’s standard ad format, and he believes the redesign of the Snapchat app that’s underway creates even more risks to engagement and execution. Snap management announced the redesign in connection with earnings; the new look will be inspired by Facebook and Twitter and is aimed at making the app easier to use.

Not all see big problems with Snap monetization

While the Snap monetization issue caused concerns for Nowak, Credit Suisse analyst Stephen Ju painted a different picture. He left his rating on Snap stock at Outperform while slashing his price target from $20 to $17. He described the third quarter as “another messy quarter,” although he pointed out that the company is shifting from reserve pricing to auctions, which he said drove the revenue shortfall.

He’s convinced that Snap monetization is moving in the right direction but that the process is simply taking longer than he had anticipated. He noted that programmatic Snap Ad impression sales now make up 80% of the total, up from 60% in the previous quarter and 0% a year ago. He believes that it’s only a matter of time until revenues earned via auctions surpasses 50% as the programmatic impression mix nears 100%, and then he expects the pricing headwind to become a tailwind.

Stifel analyst Scott Devitt downgraded Snap stock to Hold and slashed his price target from $18 to $13 following the earnings report. Like Ju, he sees the ad business ramp as going more slowly than he previously expected. Because of the company’s trajectory, he has difficulty justifying any upside to the company’s stock.

Snap stock bulls turn bearish

Some analysts that were bullish on Snap stock began to question their positions following the third-quarter results. RBC analyst Mark Mahaney downgraded the stock from Outperform to Sector Perform and set a $15 price target, citing poor visibility. He noted that the shift toward programmatic ads slashed a rapid decline in cost per impressions. Further, he noted that the company missed on daily active users, citing its focus on growth among older demographics, the rest of the world, and Android users.

Mahaney stated bluntly that he has “had the wrong call” since initiating coverage of Snap stock when it was priced at $24 per share. He still sees the stock as “a very interesting asset with great product innovation,” but he has problems with the lack of visibility, the lack of daily user growth, and uncertain engagement. He noted that the company didn’t highlight any metrics to show improving engagement beyond simply saying that time spent, frequency of use and Snap creation all increased.

Snap stock tumbled by another 4.69% to $12.31 during regular trading hours on Thursday, adding to the plunge it took on Wednesday.

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