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That Sound You Hear Is Every Manager Who Bought Snap Hurling A Keyboard At The Millennial Analyst Who Recommended It

Snap out of it!
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Wednesday was a day of reckoning for Wall Street's thirst trap du jour, Snap, Inc. It was the first quarterly release since the camera company's deliriously hyped IPO dropped, and boy was it a doozy.

Daily active users, revenue and earnings per share all missed. The Etsy of social media lost $2 billion, largely in compensation expenses, while bringing in just $158 million. The stock fell more than 25 percent after-hours. Revenue per U.S. user clocked in at $1.71 – about a tenth of Facebook's. In other words:

Courtesy Flickr user Stephan Mosel

(Courtesy Flickr user Stephan Mosel)

But on the earnings call, Snap's precocious CEO Evan Spiegel defended the company's prospects. “People really enjoy looking like a puppy – ha – and things like that,” he said at one point. Asked by an analyst whether non-millennials can ever be led onto the platform, Spiegel recalled how he taught his grandma to use email 20 years ago (when he was six). His IPO bonus: $750 million.

(We define Adjusted EBITDA as net income (loss), excluding interest income; interest expense; other income (expense), net; income tax benefit (expense); depreciation and amortization; and stock-based compensation expense and related payroll tax expense. We define Free Cash Flow as net cash used in operating activities, reduced by purchases of property and equipment. See appendix for reconciliation of net loss to Adjusted EBITDA and net cash used in operating activities to Free Cash Flow.)

(We define Adjusted EBITDA as net income (loss), excluding interest income; interest expense; other income (expense), net; income tax benefit (expense); depreciation and amortization; and stock-based compensation expense and related payroll tax expense. We define Free Cash Flow as net cash used in operating activities, reduced by purchases of property and equipment. See appendix for reconciliation of net loss to Adjusted EBITDA and net cash used in operating activities to Free Cash Flow.)

We look forward to hearing reactions from Goldman Sachs, Morgan Stanley, Jefferies, RBC, Cowen, and Credit Suisse, whose positions as Snap underwriters should give them prime vantage points into their uniformly held buy thesis moving forward. “It should be a fun rest of the year,” Spiegel said.

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