Snap: Profit alert highlights more than macroeconomics

There is not much luck with gadgets. Video recording glasses, first sold in 2016, caused a loss of about $ 40 million. The release of the Pixie, a slightly yellow drone, coincided with a sharp fall in the company’s share price this year.

Co-founder Evan Spiegel’s determination that Snap is a camera company means he will probably continue to bring new hardware. But investors properly act as a social media network for his company that earns from digital advertising.

The growing number of users is not enough to save Snap from revenue growth. Snapchat’s Los Angeles-based parent warned that it would miss the current quarter’s revenue growth target of 20-25 percent, as well as the consistent Ebitda target. This year’s hopes of a positive net income may end. The stock fell 29 percent in after-hours trading. That puts Snap below one-third of its 2017 list price

Snap blames a deteriorating macroeconomic background The war in Ukraine, Apple and Alphabet’s privacy restrictions, and rising inflation are slashing digital advertising budgets. Colleagues, including Meta and Twitter, have pointed to the same problem.

But Snap’s willingness to experiment also demands scrutiny. Its reputation for innovation has captured the attention of users. Big companies are following his interest in augmented reality. But it is expensive. Last quarter, R&D costs were $ 455.5mn, equivalent to 43 percent of revenue. Facebook & # 39; s core meta in R&D equates to 28 percent of $ 7.7bn of revenue.

Bulk up his balance sheet when he can at least snap. Repeatable sales of convertible debt mean ржи 2.4 billion in cash and cash equivalents, down from $ 1 billion last year, plus $ 2.6 billion in marketable securities.

That’s just as good. Spiegel and his co-founder Bobby Murphy retain 99 percent of the voting power after selling public non-voting shares. The company may have promised to slow down recruitment, but Snap’s costly focus on bright ideas is unlikely to change.

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