Snap’s stock “could go to $0/share,” wrote New Constructs CEO David Trainer in a note. “The cash bonfire at Snap shows no signs of ending.” $SNAP has fallen 73.3% this year, compared with the S&P 500 Index’s decline of 13.9%.
Snap’s recently announced restructuring effort sparked a rally in the company’s shares. But the Snapchat parent is still a “zombie stock” as far as independent equity research firm New Constructs is concerned.
The research firm, which uses machine learning and natural language processing to parse corporate filings and model economic earnings, added Snap Inc. SNAP, -0.12% to its Zombie stock list in July. “These changes are not enough to keep it from running out of cash,” writes New Constructs’ Trainer. “Instead, we see the restructuring as confirmation that the company has pivoted from growth mode to survival, i.e. avoid bankruptcy, mode.”
Competitive challenges, including from Apple Inc. AAPL, +3.83%, mean Snap’s cash burn is likely to continue, according to the research firm.“The cash bonfire at Snap shows no signs of ending as the company burned through $4 billion in FCF excluding acquisitions over the TTM ended 2Q22,” writes Trainer.
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