The word on the street is Snap Inc (NYSE:SNAP) CEO Evan Spiegel is pushing hard to get the company to breakeven status by the end of 2018. Is that enough to get Snapchat stock back into the $20s? Maybe.

Or perhaps it’s a good way to whitewash the fact Spiegel made $638 million in 2017, most of it from a one-time stock grant of Snapchat stock when Snap went public last March, while aggressively shrinking headcount to make Wall Street take notice.

The first move to cut payroll came in January when the company let go two dozen employees from Snapchat’s content division; this week, it laid off 120 engineers or about Snapchat laid off 120 engineers or about 10% of the engineering department.

From a business perspective, when you’re losing money, job cuts have to be made. I think everyone understands they’re a necessary evil.

However, cutting out cash bonuses for employees missing internal goals when you’ve just announced to the world your CEO is $638 million richer due to Snapchat stock grants, doesn’t exactly lend itself to employee loyalty and retention.

Breaking Even with Snapchat Stock

Spiegel thinks the company can do it. I’m not nearly as convinced.

On the plus side, Snap Inc grew revenue in 2017 by 104% to $825 million. It also grew daily active users (DAUs) by 18% to 187 million and average revenue per user (ARPU) by 46% to $1.53.

All three of these figures are company records.

On the downside, Snap Inc lost $3.5 billion on a GAAP basis in 2017, seven times the loss a year earlier. However, on a non-GAAP basis, it lost $720 million in adjusted EBITDA, less than double what it lost in 2016.

Furthermore, if you consider that $2.7 billion of its $4.3 billion in operating costs in 2017 were stock-based compensation, one might make the case it really only lost around $775 million from operations.

That works out to a loss of $4.14 per DAU in 2017, $3.26 in 2016, and $3.49 in 2015.

Getting to Zero

Spiegel realizes that if he has any chance of breaking even in 2018, operating expenses must come down significantly, hence the layoffs; but Snap Inc must also double revenues or it has absolutely no chance of meeting this goal.

If you exclude stock-based compensation, Snap’s operating expenses in 2017 were 194% of revenue. That’s lower than both 2016 at 229% and 751% in 2015.

So, if Snap Inc cuts operating expenses in 2018 by 25% to $1.2 billion (excluding stock-based compensation) and doubles revenue to $1.6 billion, it would deliver a $400 million non-GAAP operating profit.

For me, the doubling of revenue would seem to be the far easier of the two tasks. Cutting 120 engineers might save the company $36 million annually ($200,000 average salary plus 50% for benefits = $300,000 * 120) which is 10% of the $400 million it would need to cut.

However, that’s to get to a $400 million non-GAAP operating profit. To get to breakeven, it only needs to double revenue and keep expenses at $1.6 billion.

The Bottom Line on Snapchat Stock

So, what I don’t understand, is why Spiegel is in such a hurry to get to breakeven. The problem isn’t that the company is losing money, the problem is that it only has 187 million daily active users and $825 million in revenue.

He shouldn’t be cutting staff, nor should he be hurting morale by cutting bonuses. After all, what’s the difference between losing $775 million from operations on a non-GAAP basis or $875 million?

I just don’t see how focusing on breaking even is going to make Snapchat stock more attractive. It’s the top-line that matters, not the bottom.

As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.