Wall Street is definitely not sold on the prospects for upstart social media platform Snap Inc. (SNAP - Get Report) .

Short interest -- or wagers against a company's stock price -- for Snap has now climbed to more than $1 billion, according to S3 Research. The latest dose of bearishness on Snap was sparked by a critical new note from a Wall Street analyst.

Downloads of its Snapchat app have fallen 22% year-over-year during the first two months of the second quarter, according to Nomura analyst Anthony DiClemente, which points to a sustained slowdown in user growth. That's compared to a 6% increase in app downloads in the first quarter. DiClemente maintained his Reduce rating (the equivalent of a Sell) on the stock, as well as his $14 price target.

Facebook's (FB - Get Report) Instagram, meanwhile, has shown positive year-over-year growth in iOS worldwide app downloads, DiClemente said. This does little to dispel investors' concerns that Snap could eventually find itself crushed by Facebook's competitive might.

"Our overall takeaway from these data points is that Instagram's strategy of replicating key aspects of Snap's use case is bearing fruit, limiting Snap's ability to attract new users," he added in a note to clients.

Compounding that gloomy outlook is DiClemente's view that monetization is unlikely to reaccelerate in the near future, which will not help Snap's all-important average revenue per user (ARPU) metric. Additionally, Snap executives recently said they expect ad seasonality to press ARPU lower in the second and third quarters of this year.

Snap could be struggling.
Snap could be struggling.

DiClemente now expects Snap's second quarter ARPU growth to be slightly more than half that of first quarter levels and believes the number will continue to decelerate in the third and fourth quarters. He also lowered his full-year revenue outlook to $842 million, down from $953 million, which was already lower than consensus estimates of $991 million for the year.

As if those two factors weren't enough, Snap's 150-day and 180-day lockup periods expire on July 30 and August 2, respectively, which will likely generate downward pressure on the company's stock.

"With more than 80% of Snap's total diluted shares becoming available post lockup in August, the impact of the data points cited above may be exacerbated," DiClemente explained.

Points out S3 Research, "With short interest increasing even at these expensive borrow rates, it looks like short sellers are positioning themselves for a dramatic selloff in Snap's stock price after the lockups expire."

Shares of Snap have plunged 20.1% since the company debuted in March.

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Editor's Pick: Originally published June 8.