Snap “is quickly running out of money” and may need to raise capital by the middle of next year, according to a scathing new research report from MoffettNathanson.
In order to reach CEO Evan Spiegel’s goal of profitability in 2019, Snap would need to grow “massively faster” than expected and cut costs aggressively, analyst Michael Nathanson wrote.
He expects a loss of more than US$1.5-billion in 2019 as Snap looks to rebuild its user base. And given increased competition from Facebook’s Stories format, Nathanson said it may be difficult to attract new users to Snapchat.
“We do not see Snap reaching profitability in the near future unless there are substantial expense reductions,” Nathanson wrote. “In 2019, Snap will have to make some moves to ensure it has the liquidity to stay in business.”
Nathanson cut his revenue estimates and lowered his price target on Snap to $6.50 from $8. He kept a neutral rating on the shares, saying short sellers have already made the “easy money” with the stock down 58% since its initial public offering in March 2017.
The shares fell 4.1% at 10.02am New York time. Snap didn’t immediately respond to an e-mailed request for comment before normal business hours. — Reported by Kriti Gupta, (c) 2018 Bloomberg LP