Snap Stock reaches a new low; Analyst says he is "short of money quickly"

UPDATE with closing price: The shares of Snapchat, parent company of Snap Inc., plunged after a harsh report written by a Wall Street analyst, who warned that the company "was running out of money quickly."

The stock has fallen more than 6% today to $ 7, its lowest closing price since its IPO in March 2017. Transaction volume was double the average. During the last hour of the session, shares plunged to a historic low of $ 6.84.

Michael Nathanson, a senior media and technology analyst, warned his clients that the social media giant had very few resources, saying the social media company "was running out of money quickly" and needed more information. a "miracle" solution. His war chest could be completely empty by 2020, he projected.

Nathanson quoted a note from Snap CEO Evan Spiegel, who had fled last week. Spiegel outlines the goals for 2019 to accelerate revenue growth while generating positive cash flow and profitability for the full year. While the memo suggests that Snap "is trying to do the impossible," writes the analyst, "Facebook is climbing [Instagram] Stories of use and monetization through its massive installed base. "

Anticipating lower revenue and user growth, Nathanson lowered its 12-month price target from $ 6 to $ 6.50, while maintaining its neutral equity rating.

Since his IPO, argues Nathanson, Snap has shown that he was "not quite ready for the major leagues". Free cash flow has been reduced to $ 250 million per quarter in 2018, noted the analyst.

"Capital spending has been relatively modest, so the biggest contributor to Snap's cash balance was his main business," Nathanson wrote. "If the current budget is exhausted, Snap will have to raise new funds in the second half of 2019!"

The "self-inflicted damage" of redesigning an unpopular application in the fall of 2017, as well as its upcoming Android application, said Nathanson, were accompanied by increased competition. Instagram, owned by Facebook, has increased the number of daily active users for Stories to about 400 million in July 2018, up from 250 million in July 2017.