Shares of Snap reached all-time lows Tuesday on the heels of reports that the social media company is running out of cash. The parent company of Snapchat sunk to $7.04 a share shortly after 11 a.m. Tuesday, before rising several cents.
The decline marks a 70 percent drop since Snap went public at $24 a share in March 2017 and a 74 percent fall from the stock's brief peak price of $27 a few weeks later. The company has continued losing money since its initial public offering, but CEO Evan Spiegel recently outlined a plan, leaked earlier this month, to be profitable by 2019. In a lengthy memo, Spiegel acknowledged that the company "rushed" its and set a goal of breaking even in the fourth quarter of this year and turning a profit in 2019.
But next year may not be soon enough, according to some analysts. Snap has been losing upward of $300 million every quarter since it went public in March 2017 — and the company may need to raise cash as early as next year. If it cannot, and it continues burning through cash at its current rate, the analysts say Snap's coffers will be empty by the summer of 2019.
"The clock is certainly ticking for Snap to turn its business around," Michael Nathanson, senior research analyst at Moffett Nathanson, wrote in a note Monday. Nathanson lowered his price target on Snap from $8 to $6.50 a share.
Snap might avoid needing to raise cash if it can increase user growth and cut costs. However, its user numbers actually dropped in the latest quarter, while its costs per user have grown, according to Nathanson. He wrote that a turnaround would be a "miracle."
'[I]t is obvious now that Snap wasn't prepared for life as a public company," he wrote.
Still, not everyone is bearish on Snap's prospects. Wedbush Securities reacted positively to Snap's hiring last month of two seasoned executives to replace the company's departing Chief Strategy Officer and CFO. The two hires show a professionalization at the top, Wedbush analysts wrote in a note, upping their stock rating to "outperform" with a $12.25 price target. .
"Cash burn is high, but they have enough to get through 2019 at this rate, and longer if they improve their performance," Michael Pachter, managing director of equity research at Wedbush Securities, told CBS MoneyWatch.