Categories: Business

Snap ‘is going through a near-death experience,’ analyst explains

[ad_1]

Snap’s stock crash on Friday after a dismal second-quarter earnings report and brutal call is well warranted, one analyst explained to Yahoo Finance.

“I feel like the company is going through a near-death experience,” MKM Partners Analyst Rohit Kulkarni said on Yahoo Finance Live (video above). “It’s macroeconomic, Apple and TikTok on top of that customer concentration.”

Despite an awful first quarter that did its part to reset investor growth expectations in the current environment, Snap’s latest results were arguably more worrisome.

The company posted sales of $1.11 billion, shy of Wall Street estimates for $1.14 billion, as the slowing economy further pressured Snap’s ad business. Adjusted operating profits crashed 94% to $7.1 million. Free cash flow was an outflow of about $147 million.

Snap did tally up 347 million daily active users versus the 343.2 million expected. But that wasn’t enough for Snap’s executive team to pitch sunnier days ahead to Wall Street.

“We have seen a pretty good deceleration over the last 90 days,” Snap CFO Derek Anderson told analysts on a conference call. “Specifically, advertising spending in particular, auction-driven direct response advertising is among the very few line items in a company’s cost structure that they can reduce immediately in response to pressure on their top line or their input costs. As a result, as many industries and verticals have come under top line or input cost pressure, advertising spending has been amongst the first areas impacted.”

Snap also withheld third-quarter guidance amid the uncertainty it’s seeing in the business.

A man walks past the logo of Snap Inc. at New York Stock Exchange in New York, the United States on March 2, 2017. (Xinhua/ Wang Ying via Getty Images)

In total, 12 Wall Street firms slashed their ratings on Snap shares today in a show of concern over future growth.

“We found incremental concerns that temper our enthusiasm around the company’s near- to mid-term growth prospects, and we are therefore downgrading SNAP to hold,” Deutsche Bank Analyst Benjamin Black wrote in a note to clients. “Our concerns are as follows: 1) As the overall demand environment slows, SNAP’s ability to grow has contracted as incremental (and experimental) budgets have decreased. Perhaps more concerning, the company highlighted increased competition for advertising dollars, and we think SNAP may have been displaced by TikTok as the experimental platform of choice (which has become the 3rd platform behind META and GOOGL) and is now less able to garner outsized share of these incremental spending budgets as demand trends normalize.”

Black downgraded his rating on Snap to hold from buy.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

Click here for the latest trending stock tickers of the Yahoo Finance platform

Click here for the latest stock market news and in-depth analysis, including events that move stocks

Read the latest financial and business news from Yahoo Finance

Download the Yahoo Finance app for Apple or Android

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube

[ad_2]
Source link
Admin

Recent Posts

The Role of Antiscalants in Water Purification Systems

In the pursuit of clean, safe drinking water, the role of water purification systems cannot…

3 hours ago

How Much Does Physiotherapy Cost In Melbourne: Cost Analysis by The Alignment Studio

Determining the cost of physiotherapy can be an essential factor when you're seeking treatment to…

3 hours ago

Why your Business Should Outsource their App Development Project to an Experienced Application Development Agency

In today's digital age, mobile applications have become indispensable tools for businesses looking to engage…

10 hours ago

The Best Games to Play at the Casino

When gambling at the casino, it is essential to know which games offer the highest…

1 day ago

What on earth is Online Casino?

Online casinos are a type of gambling whereby players wager on different games utilizing digital…

2 days ago

Forex Prop Trading Firms

Forex prop trading firms have become an increasingly popular part of the financial industry. These…

3 days ago