Snap’s Cash Could Run Dry By Mid-2019

Snap, the maker of a disappearing messenger app, may have to raise capital by the middle of next year, according to MoffettNathanson. The Wall Street firm wrote in a research note that the company is running out of cash.

“While it is obvious that Snap wasn’t prepared for life as a public company, it now has a more pressing problem. It is quickly running out of money,” analyst Michael Nathanson of MoffettNathanson said. The analyst slashed his revenue estimates for Snap for next year by 7 percent and cut 15 percent off of his 2020 estimates. Both show slower user growth and revenue per user growth.

Shares of Snap, which were trading down, hit an all-time low in intraday trading Tuesday (Oct. 9). The stock is more than 55 percent lower than its initial public offering in March of last year, when it started trading at $17 a share.

“Although Twitter pulled off a similar miracle, call us skeptical as — despite the memo — we don’t have faith in Snap’s leadership to navigate these rapids,” Nathanson added. The analyst was referring to a recent memo from Snap in which CEO Evan Spiegel unveiled new strategic goals and acknowledged shortcomings with a recent design of its app.

“In our excitement to innovate and bring many new products into the world, we have lost the core of what made Snapchat the fastest way to communicate,” Spiegel wrote in the document, calling the update “rushed.” The company is currently testing a Discover section that highlights celebrity and professional company accounts.

Snapchat’s daily active user base increased 8 percent quarter-over-quarter, and average revenue per user hit $1.40, a 34 percent year-over-year increase from Q2 2017. The company also reported other areas of growth as it competes against Facebook-owned Instagram and other platforms.

“The number of people that watch Publisher Stories and Shows on iOS every day has grown by more than 15 percent this year, and we are excited to bring the learnings from our iterations on iOS to our Android application,” Spiegel said.