Snap stock near record low after analyst reportedly says ‘quickly running out of money’

Snap CEO Evan Spiegel speaks onstage during ‘Disrupting Information and Communication’ at the Vanity Fair New Establishment Summit at Yerba Buena Center for the Arts on October 8, 2014 in San Francisco, California.Getty/Michael Kovac

• Snap is sliding ahead of Tuesday’s opening bell after MoffettNathanson analyst Michael Nathanson reportedly slashed price target, saying the company is “quickly running out of money.”
• Last quarter the social-media company reported its first-ever decline in sequential daily active users and said its cash burn was up in the second quarter.
• CEO Evan Spiegel recently sent out an internal memo admitting the company moved too fast in 2018 and laid out a path to profitability in 2019, but Nathanson is skeptical.
• Watch Snap trade in real time here.

Snap shares are down about 3% ahead of Tuesday’s opening bell —and set to open near a record low — after  MoffettNathanson analyst Michael Nathanson slashed price target to $6.50 from $8, saying the social-media company is “quickly running out of money.”

By the Nathanson’s calculation, Snap needs a capital raise in the middle to end of 2019, as reported by StreetInsider.

Snap’s second-quarter earnings, released on August 7, showed the company topped both the top and bottom lines, but that it suffered its first-ever decline in sequential daily active users. Additionally, the company’s cash burn jumped to $234 million from $229 million in the same quarter of 2017. 

The decline in user trend “was primarily driven by a slightly lower frequency of use among our user base due to the disruption caused by our redesign,” CEO Evan Spiegel said on a call with analysts after the earnings report.

In February, Snapchat released a controversial app redesign that triggered backlash from users — including celebrities like Kylie Jenner, who tweeted to her 24.5 million followers, “Sooo does anyone else not open Snapchat anymore?” The main complaint was the redesign separated celebrity Snapchat stories from those that came from your friends. Jenner’s tweet wiped out more than $1 billion from Snap’s market capitalization in a single day. 

Last Week, Spiegel sent out an internal memo running over 6,500 words long, admitting the company moved too fast in 2018 — specifically referring to the controversial Snapchat redesign — adding that Snap has “lost the core of what made Snapchat the fastest way to communicate.” The internal memo outlined company-wide goals for 2019, including accelerating revenue growth and achieving full-year positive free cash flow and profitability.

Commenting on Spiegel’s internal memo, Nathanson, according to StreetInsider, said he is “skeptical” and that he doesn’t “have faith in Snap’s leadership to navigate these rapids.”

Snap was down 51% this year through Monday.

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