Snap: First Earnings A Massive Disappointment

| About: Snap Inc. (SNAP)


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: - red arrow added to show after-hours fall)

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