Shares of Snap Drop 11% as the Market Continues to Value the Young Company

By Daniel Miller Markets Fool.com

What happened

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Shares of newly publicly traded Snap Inc. (NYSE: SNAP) are down for a second consecutive day, trading nearly 11% lower by noon EST Tuesday.

So what

Investors can mostly chalk this movement to "stocks go up, and stocks go down," which is even more true for Snap as investors are still trying to value a company that issued shares at $17 before jumping to around $24 once unleashed upon the market. But analysts have increasingly turned bearish on the stock after its valuation soared -- even after two days of sell-offs Snap's market capitalization is roughly $24 billion.

Snap, founded in 2011, is a popular social media network with 158 million users to date, typically between the ages of 18 and 24 which is a valuable younger demographic, and despite making a lot of people rich with its recent IPO, its work for investors is still just beginning.

Image source: Getty Images.

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Now what

Snap's most important objective will be monetizing its user base. The company has its work cut out for it and could easily go the way of Twitter, which has largely failed to monetize its successful social media platform, rather than Facebook which boasts nearly 2 billion users and has become the holy grail of social media companies. Snap has thus far failed to churn a profit and has soared to rich valuations, and while it could one day be a social media king, days like Tuesday, with 10% declines, are going to be fairly common.

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Daniel Miller has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook and Twitter. The Motley Fool has a disclosure policy.