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Omar Venerio
Omar Venerio
Articles (796) 

Snap's Disappointing Earnings Make Shares Tank

Rough afternoon for the social media company

August 11, 2017 | About:

Shares of Snap Inc. (NYSE:SNAP) fell almost 15% after the company reported second-quarter loss of 16 cents per share on revenue of $181.67 million.

Earnings missed expectations by 2 cents per share. Revenue increased 153% year over year from $71.8 millon in the prior-year quarter but came up short of expectations by $5.13 million. EBITDA of -$194 million was higher than predicted – -$185.4 million.

This is the second time Snap reported as a public company, and financials are not good. Operational metrics performed better. There was higher revenue per user. Daily active users increased by 21% to 173 million from 143 million and went up 4% from the first trimester of the year. Looking at average revenue per user, it reached $1.05, more than doubling the year-ago figure and up 16% from 90 cents in the first quarter.

The company allocated more money than a year ago. Capex of $19.4 million was higher than the $16.4 million spend in 2016. Snap did not achieve a healthy cash generation; the free cash flow was -$228.94 million.

Several analysts cut their price targets. Susquehanna cut it to $10, UBS did the same to $12 (from a previous figure of $19), and Barclays and Citi had the same decision to $13. On the other hand, Drexel Hamilton reiterated a “buy” recommendation and a price of $30, which constitutes an increase of 153.5% from Friday's close. The truth is that the company lost more than half of its value as we can see in the next graph.

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Several hedge fund managers initiated new positions in the first quarter. In the next table we can appreciate the bullish sentiment:

Hedge Fund Manager

Number of Shares

Frank Sands

10,515,359

Daniel Loeb

2,250,000

Steve Mandel

1,790,364

George Soros (Trades, Portfolio)

1,650,000

Louis Moore Bacon (Trades, Portfolio)

1,330,000

Jana Partners

550,000

David Tepper

100,000

Ron Baron

100,000

Steven Cohen (Trades, Portfolio)

5,000

In the second quarter, Spiros Segalas (Trades, Portfolio) also initiated a new position with a holding of 2,557,200 shares.

Disclosure: The author holds no position in any stocks mentioned.

About the author:

Omar Venerio
Omar Venerio is capital markets, derivatives, corporate finance and financial management professor. He is passionate about the stock market and providing independent fundamental research and hedge fund and insider trading-focused investigation.

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