A leaked memo predicting faster growth in 2024 sent Snap (NASDAQ:SNAP) stock up sharply on Oct. 16. It fell slightly, about 2%, overnight.
Shares in the social media company were due to open this morning at $9.56 per share. That’s a market capitalization of $15.4 billion on expected 2023 revenue of $4.5 billion.
The company is not profitable.
Snap Back?
Snap was a big winner during the 2021 bull market, trading as high as $83 per share. But results failed to meet expectations. Sales grew 64% that year to $4.1 billion.
But growth slowed in 2022 to less than 12%, and revenue fell sharply in the first quarter of 2023. Losses have been continuous, mostly in the range of $300-400 million per quarter. The June quarter loss was $388 million, 24 cents per share. The company ended the period with about $4 billion in cash.
Snap was founded as a photo-sharing site in 2011. Co-founder Evan Spiegel, now 33, is still CEO. Robert Murphy, another co-founder, is still CTO. The founders also have control over the voting stock.
Snap came public in 2017 and closed that day at $24.48 per share.
Spiegel’s leaked memo predicted the site will have 475 million daily users next year, beating the analysts’ estimate of 448 million. It predicted advertising growth of 20% against the estimate of 14%.
Meeting the goals would mean $500 million in earnings before income taxes, depreciation, and amortization (EBITDA), the memo said. It would also mean positive free cash flow. The leak came in a profile of the company by The Verge.
Spiegel confirmed the numbers but called them “internal goals.” Analysts quickly criticized the leak, noting that Snap failed to meet most of the goals laid out in a similar 2022 memo.
SNAP Stock: What Happens Now?
Snap declined to share the memo with other media after The Verge obtained its copy from an unnamed source. Despite this, Spiegel’s credibility with the analyst community is now on the line.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
