The firm cut the price target to $67 from $78 per share while citing valuation concerns for the social media company. Analyst Justin Post said that additional multiple expansion is "unlikely" in coming quarters.
“We think investors may become increasingly concerned on tougher [second half] comps, especially in context of a broader economy that should be accelerating," Post said.
Snap was down 4.9% to $55.47 in morning trading Monday. Snap shares have experienced a correction since the stock reached an all-time high of $73.59 on Feb. 24.
Bank of America's downgrade comes less than two weeks after CEO Evan Spiegel said he expected 50%+ revenue growth "for a few years."
“The 50% number actually isn’t predicated on any further user growth or any engagement growth. That’s just looking at the steady state opportunity actually in terms of our inventory on our core platforms,” Spiegel said at a Morgan Stanley conference.
Meanwhile, Bank of America's price target is based on a 20x forward sales multiple, which is above its closest peers in the social media space. But that target has risks, including a potential deceleration in user growth and pressure on usage due to competition.
"While the anticipated acceleration in sector revenue growth in 2Q will likely be a positive data point, our call is that high-multiple stocks could be rangebound on valuation and that we have better [second half] reopening ideas with likely acceleration vs deceleration," Post said.