![]() ![]() The company generated a net loss of $306 million in the first quarter while it only has $245 million in cash and equivalents on its balance sheet. While this has improved from the prior-year period’s negative 99%, it is still a terrible margin that results in an unsustainable cash burn. And it is burning cash at an unsustainable rate. And daily time watching Snap’s Discover content rose by over 35%.īut behind all the positive facts and figures, Snap has a terrible problem: the company has terrible operating margins. Management also claims that over 4 billion snaps were created every day in the first quarter. Most impressively, the company managed to increase its daily active users by 20% to hit 229 million. Snap generated revenue of $462.5 million which is a 44% year-over-year increase from the prior-year period. Now, with Snap’s better-than-expect first-quarter results, the market is getting more optimistic about the company’s ability to meet its potential. The company IPOed at a valuation of over $20 billion which priced in a tremendous amount of growth that has been difficult to fulfill. ![]() Snap’s problem has always been its extremely large market cap. ![]() Snap has always enjoyed a very language valuation as evidenced by its $20 billion market cap. The stock started trading at $17 per share before reaching an all-time high of $29.44 before falling below its original listing price to end up at $12.44 at the close of trading on Tuesday. Snap has disappointed investors since its much-anticipated IPO in March 2017. Over time, the stock will probably give back most of its gains. The company also lacks a competitive moat and faces significant competition from rivals like Tik Tok and Facebook which offer similar platforms. The long-suffering social media company now boasts a market cap of over $20 billion as user growth continues to surge.īut is all the optimism justified? Snap has a very high top-line valuation coupled with low-profit margins. Snap (NYSE: SNAP) investors are laughing all the way to the bank as better-than-expected first-quarter earnings send the stock flying by over 20% in after-hours trading on Tuesday. Can the social media company hold off rivals like Tik Tok and Facebook?.The company performed well during the coronavirus crisis as mass quarantines boosted demand for mobile entertainment.Snap stock has soared by double-digits after better-than-expected first-quarter earnings results. ![]()
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