Shares of Snap (SNAP) plunged after the company announced that its chief financial officer will be stepping down after less than a year, becoming just the latest in a string of senior executives to leave the company. It also said it would post results that are "slightly favorable" to the top end of its previous guidance when it reports its earnings next month.
SNAP CFO OUT: In a regulatory filing on Tuesday, Snap said Tim Stone, the company's CFO, notified the company of his intention to resign to pursue other opportunities. The departure of Stone, who joined the company in May after nearly two decades at Amazon (AMZN), is not related to any disagreements with the company, it said. Stone's end date hasn’t been determined, and he will "continue to serve as Chief Financial Officer to assist in the search for a replacement," the company added. In a memo to employees seen by Reuters, CEO Evan Spiegel said "Tim has made a big impact in his short time on our team and we are very grateful for all of his hard work."
In a research note to investors, Wedbush analyst Michael Pachter said the departure of Stone is a "clear loss" for the company and its investors. The analyst's upgrade of Snap to Outperform from Neutral last September was due in large part to his belief that Stone's addition to the Snap team along with other high-profile executive changes would improve and have a measurable impact on the development of and articulation of the company's strategy, he said, adding that he has as yet to be proved right, as management's long-term vision "remains as opaque as ever." The departure of Stone is a "clear negative" as two CFOs have now left the company within one year of each other without meaningful financial progress, Jefferies analyst Brent Thill said in a research note of his own. Stone's departure is "a bad sign heading into the new year," Thill contended. RBC Capital downgraded Snap to Sector Perform from Outperform after the "surprise" exit of CFO Stone, saying that the departure is a "material negative" and adds to concerns over the company's management execution.
OTHER HIGH LEVEL EXECUTIVE DEPARTURES: Jason Halbert, Snap's head of human resources, is also leaving the company, Business Insider reported on Tuesday. His resignation comes amid a slew of departures by other senior executives at the company, including Chief Strategy Officer Imran Khan, who left in September and Nick Bell, head of content, who left in November. According to Business Insider, Elizabeth Herbst-Brady exited as head of global strategic partnerships earlier this month. Though Business Insider said the split with Halbert was "amicable," Halbert has been viewed as controversial, and interviews with current and former Snap employees said Halbert was "famous for regaling the staff with military stories that range from odd to inappropriate." On Tuesday, Cheddar reported that Snap's vice president of investor relations, Kristin Southey, resigned in November after less than four months in the role. Head of Communications Mary Ritti also left at the end of 2018, according to reports. The string of executive losses comes as Snap is dealing with financial losses and layoffs. In March 2018, Snap cut 10% of its engineering team, or just over 100 engineers, which followed three rounds of layoffs a few months prior to that. Additionally, in November 2018, Snap was subpoenaed by the U.S. Justice Department and the Securities and Exchange Commission over the company's initial public offering in 2017. The probe was related to a lawsuit filed by investors who accused Snap of deceiving the public about its competition with Facebook's (FB) Instagram.
UPDATED GUIDANCE: Also in its regulatory filing on Tuesday, Snap said that it expects to report revenue and adjusted EBITDA results for Q4 that are "slightly favorable" to the top end of its previously reported quarterly guidance ranges for each. The company previously said it expected fourth quarter revenue of $355M-$380M. Analysts currently expect the company to report revenue of $374.58M. Snap is expected to report its earnings on February 5.
Earlier this week, Barclays analyst Ross Sandler said Snap shares may "may start to get a bid" after a disappointing 2018. The stock's setup is similar to Twitter (TWTR) in early 2017, when sentiment went from very negative to "stable with franchise value" and shares tripled in value, Sandler said. If Snap were to deliver on any of the CEO's three "primary lofty goals" for 2019, or achieving breakeven point, accelerating revenue, and growing daily active user growth, the shares could potentially double from current levels, he contended. Separately, on Monday, Citi analyst Mark May upgraded the stock to Neutral and said he expects Snap will soon fully rollout a new version of its app for Android, which could improve user and engagement growth. In addition, the analyst noted that Snap's advertising average revenue per user accelerated in Q3, which bodes well, especially if user growth likewise improves later in 2019.
PRICE ACTION: In morning trading, shares of Snap are down nearly 12% to $5.77.
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