(Reuters) - Shares of Snap Inc <SNAP.N> fell 6% on Wednesday, as Wall Street focused more on a disappointing revenue outlook than regulators no longer investigating the company over whether it misled investors at the time of its 2017 initial public offering.
The shares rose in premarket trade after Snap disclosed in a regulatory filing that the U.S. Department of Justice and the Securities and Exchange Commission ended their investigation. (http://bit.ly/2BCrEwd)
Snap said the DOJ and SEC had provided the company with written confirmations in September that they are no longer pursuing their investigations.
The news about the subpoena was first disclosed last year, and followed a shareholder lawsuit in which investors alleged that Snap misled the public about how competition from Facebook Inc's <FB.O> Instagram service had affected the company's growth.
"We continue to believe the underlying securities class action's claims are meritless and our IPO disclosures were accurate and complete," the company said.
But investors seemed to put a microscope on Tuesday's revenue figures. Snap estimated fourth-quarter revenue at $540 million to $560 million, the midpoint of which was below analysts' estimate of $555.4 million, according to IBES data from Refinitiv.
Jefferies analyst Brent Thill said that Snap's potentially conservative forecast and accelerated path to profitability gave him more conviction in Snap's story, but he was disappointed by its fourth-quarter revenue forecast.
"Jefferies is positive fundamentally (on Snap), but would wait for a pullback to get constructive," Thill said.
Shares of Snap, the parent company of photo messaging app Snapchat, were down 6% at $13.18. They rose as much as about 3% in morning trade.
At least six brokerages raised price targets on Snap after its quarterly results, with JP Morgan one of two brokerages to boost its recommendation for the shares to "overweight" from "neutral".
RBC Capital Markets analyst Mark Mahaney said Snap was still one of the most innovative platforms in the social media space and highlighted that the company was "arguably more investible now than at any point in its public trading history".
"The last couple quarters suggest premium growth resilience and a more credible path to profitability (for Snap)," Mahaney said.
(Reporting by Aakash Jagadeesh Babu and Noor Zainab Hussain in Bengaluru, additional reporting by Neha Malara; editing by Patrick Graham, Bernard Orr)