Part of the lack of enthusiasm from investors is that it was obvious from the beginning that Snap's 589-percent revenue growth in 2016 would have to slow down, Cramer said. The problem is it slowed down a lot faster than many investors had hoped.
In fact, Snap's two most recent earnings report showed a 286-percent revenue growth and 153 percent revenue growth — numbers that are terrific yet still weaker than what Wall Street expected. Meanwhile, the company's financial discipline is questionable, especially stock-based compensation costs, marketing, research and development and operational costs.
As such, one of investors biggest concerns at the time of the IPO, namely when will Snap be profitable, remains even less certain today than it did months ago."If anything, it's just more murky now," Cramer said. "Snap's stock may have stabilized, but I think it's still too soon to give this one our blessing as an investment."
Bottom line, Snap's stock has very much stabilized but investors need to see more signs that management has figured out what needs to be done to turn the business around.
"I remain open-minded and I want to believe, but my discipline tells me it's soon to recommend the stock of Snap," he concluded.
Related Links: Headline Risk Grows For Snap Ahead Of Q3 Print Snapchat Stories Usage Down 33% In 6 Months Among Influencers© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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