![]() SNAP ended the quarter with $4.1 billion of cash versus $3.7 billion of debt, It's ironic that such a result led management to state that they were continuing to “make progress on our path to sustainable profitability.” The combination of revenue decline and gross margin deterioration led adjusted EBITDA to decline to just $1 million. SNAP saw gross margins deteriorate 5 percentage points in the quarter largely due to substantial growth in infrastructure costs. At least SNAP appears to remain relevant (for now). The lone bright spot in the quarter was the 15% YOY growth in average daily active users. While management seems adamant that these are near-term headwinds, investors can be forgiven for thinking otherwise. On the conference call, management blamed the weakness due to changes made to drive more click-through conversions, namely making it so that users only see advertisements when they click. The main culprit of the weakness was the 19% decline in average revenue per user (‘ARPU’). While that might not sound so bad, consider that META generated a 2.7% YOY increase and SNAP was supposed to be a smaller yet faster growing competitor. In this most recent quarter, SNAP reported a 7% YOY decline in revenue. The stock since fallen around 25% as the apparent cheapness provided little support in the face of a deteriorating thesis. I last covered SNAP in March where I highlighted the increasing risks but noted the low valuation. It's easy to forget that this was once a rapidly-growing tech stock. SNAP Stock PriceĪfter the post-earnings tumble, SNAP once again trades around all time lows. I can thank position sizing for limiting the damage to my overall portfolio, but I cannot ignore reality: Something is clearly wrong here and it's not just macro to blame. ![]() This puts me in the uncomfortable position where SNAP is down materially from my cost basis, but I have no desire to add to my position. But whereas META was able to show both robust top-line growth and strong free cash flow, SNAP reported negative revenue growth and saw its adjusted EBITDA all but vanish. The stock had initially rallied on the day of the release (the company released at the close of Thursday’s trading) due to better-than-feared results at Meta Platforms ( META). Snapchat ( NYSE: SNAP) plunged after releasing first quarter results. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |