Deeming Snap Inc (NYSE:SNAP) largely “still a start-up,” top analyst Youssef Squali at Cantor believes the Snapchat-parent company still has a lot left to prove before investors should back the company. Therefore, the analyst initiates coverage on SNAP with an Underweight rating and a price target of $18, which represents an 11% downside from where the shares last closed.

Squali explains, “While the company has passed two critical phases of growth — proof-of-concept for the product and scaling the user base to over 100M, it has yet to empirically prove to marketers that the platform works for them. Dozens of leading brands use the platform today to get exposure to the harder-to-reach younger demos, but much of this spend so far comes from small experimental budgets. The company has much work ahead to prove that ROI on the platform is not only positive, but competitive with other platforms chasing these digital ad dollars.”

Ultimately, “Our rating is based on 1) the company’s current valuation, which we find rich under most scenarios; 2) an unproven model with marketers generally seeing their spend on Snap so far as experimental; 3) an untested management team; 4) slowing growth trends in DAUs and in monetization in the last couple of quarters; and 5) an intense competitive landscape with fast followers who enjoy greater scale in consumer reach, R&D and brand,” Squali contends.

Looking ahead, the analyst waits to see how the company’s daily active user (DAU) as well as monetization growth progress this year, which he believes will be the most influential factor in assessing the “growth curve of Snapchat.”

Youssef Squali has a very good TipRanks score with a 69% success rate and a high ranking of #75 out of 4,539 analysts. Squali garners 12.3% in his annual returns. When recommending SNAP, Squali earns 0.0% in average profits on the stock.

TipRanks analytics indicate SNAP as a Sell. Based on 9 analysts polled by TipRanks in the last 3 months, 4 maintain a Hold on SNAP, while 5 issue a Sell. The 12-month average price target stands at $18.17, marking a nearly 11% downside from where the stock is currently trading.

More stocks covered by top performing analysts can be found here.