While this has improved from the prior-year period’s negative 99%, it is still a terrible margin that results in an unsustainable cash burn. And it is burning cash at an unsustainable rate. And daily time watching Snap’s Discover content rose by over 35%.īut behind all the positive facts and figures, Snap has a terrible problem: the company has terrible operating margins. Management also claims that over 4 billion snaps were created every day in the first quarter. Most impressively, the company managed to increase its daily active users by 20% to hit 229 million. Snap generated revenue of $462.5 million which is a 44% year-over-year increase from the prior-year period. Now, with Snap’s better-than-expect first-quarter results, the market is getting more optimistic about the company’s ability to meet its potential. The company IPOed at a valuation of over $20 billion which priced in a tremendous amount of growth that has been difficult to fulfill. Snap’s problem has always been its extremely large market cap. Snap has always enjoyed a very language valuation as evidenced by its $20 billion market cap. The stock started trading at $17 per share before reaching an all-time high of $29.44 before falling below its original listing price to end up at $12.44 at the close of trading on Tuesday. Snap has disappointed investors since its much-anticipated IPO in March 2017. ![]() Over time, the stock will probably give back most of its gains. The company also lacks a competitive moat and faces significant competition from rivals like Tik Tok and Facebook which offer similar platforms. The long-suffering social media company now boasts a market cap of over $20 billion as user growth continues to surge.īut is all the optimism justified? Snap has a very high top-line valuation coupled with low-profit margins. ![]() ![]() ![]() Snap (NYSE: SNAP) investors are laughing all the way to the bank as better-than-expected first-quarter earnings send the stock flying by over 20% in after-hours trading on Tuesday.
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