Shares of Snap Inc. were falling 5% Tuesday morning after the stock was downgraded to equal weight from overweight at Morgan Stanley, one of the lead underwriters on Snap's March initial public offering. The downgrade was based on reports that Snap's ad products are not improving as quickly as expected, including its ad return on investment measurability, which hurts the company's ability to monetize its user base, said Brian Nowak, lead analyst on the note. At the same time, Facebook Inc.'s Instagram, which has been offering a similar and evolving offering to Snap, is becoming more "aggressive" in going after the advertising dollars that Snap is seeking. On top of this, third party data indicates that downloads of Snapchat are decreasing, which likely means weak daily active user growth. Nowak lowered his 2017 and 2018 ad revenue estimates by 7% and 13% respectively and now expects daily active users of 182 million for 2017, compared to his previous estimate of 185 million. Nowak lowered the stock's price target to $16 from $28. Shares of Snap have fallen 10.7% in the past month, while the S&P 500 has remained unchanged.
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