Snap (NYSE:SNAP) has been on a wild ride since its initial public offering back in March 2017. Three years later and Snap is still struggling to reach profitability, although it has eaten into its net loss. Shares have climbed 26% in 2020 as of close on June 8. The stock has increased 58% over the past three months.
The company released its first quarter 2020 results on April 21. Revenue rose 44% year-over-year to $462 million. Daily Active Users (DAUs) increased 20% year-over-year to 229 million. It saw solid growth in North America, Europe, and Rest of the World. However, Snap still reported a net loss of $306 million in the first quarter. This was up $4 million from the prior year.
Snap has managed to make gains with its advertising push, but it is still in a tough competition with other social media providers. Facebook holds a dominant position in this space with Instagram and Whatsapp.
This has put a limit on Snap’s growth and caused many investors to shy away from the stock. Moreover, Snap also possesses a middling balance sheet. It reported negative free cash flow of $5 million in Q1 2020.
Shares of Snap last had a sky-high price-to-book value of 14 as of close on June 8. User activity has surged during the COVID-19 pandemic, but there is little reason to believe that it can overtake its competition and make the leap to profitability anytime soon. I’m shying away from Snap stock in 2020.
