Snap: First Earnings A Massive Disappointment

| About: Snap Inc. (SNAP)

Summary

Revenues and active users fall short of estimates.

Cash burn continues to mount.

Shares hit new trading low.

After the bell on Wednesday, camera company Snap (NYSE:SNAP) reported its first quarter as a publicly traded firm. For investors, it will be a report to remember, but not in a good way. The company disappointed on many fronts, sending shares to their lowest point since the stock started trading.

Revenues in the first quarter grew 286% over the prior-year period, coming in just under $150 million. While that growth is lovely, the street was looking for almost $158 million, so this is a sizable miss. Daily active users, a key metric for all social media type companies, came in at 166 million, also short of expectations for 168 million. The company also announced a staggering $2.2 billion net loss thanks to $2 billion in stock-based compensation impacts from the IPO.

When I first covered the name around the time of the IPO, one of my biggest concerns was that the company had high cash burn, more than $1 billion in the past two years. Things actually got worse in Q1 2017, with the company reporting free cash flow of negative $173 million, compared to $105 million in the year-ago period. The company does have a lot of cash now thanks to the IPO, more than $3.2 billion, but if it keeps burning through it, we'll see debt or equity markets tapped again.

In the after-hours session, Snap shares have fallen more than 24% to trade just below the $17.50 mark. This eclipses the previous trading low of $18.90 by well over a dollar and marks a substantial drop from the early trading high of $29.44. The chart below shows how bad things have gotten recently, and if the company doesn't get its act together, plenty of downside remains.

(Source: cnbc.com - red arrow added to show after-hours fall)

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Tagged: , Earnings
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