Even at $6, Snap’s stock still isn’t a bargain, Cramer warns: ‘It’s an ill-advised decision to buy’

Snap still isn't a bargain, even at $6, says Cramer

Snap still isn’t a bargain, even at $6, says Cramer   6:48 PM ET Fri, 30 Nov 2018 | 00:51

Snap Inc.’s stock price may have fallen to just over $6 a share — down about 70 percent from where the stock started publicly trading — but even this low price shouldn’t fool investors, CNBC’s Jim Cramer said Friday.

“Do not be tempted by Snap’s $6-and-change share price. It’s not a bargain,” he warned. “At more than five times next year’s sales [estimates], you could argue it’s actually fairly expensive. And, of course, there are some alarming long-term trends here.”

For Cramer, host of “Mad Money,” the most worrisome thing about the Snapchat parent is its cash generation. When Snap went public in early 2017 with nearly $1 billion on its balance sheet, that was the last thing investors were worried about, but lately, “Snap’s cash hoard has been slowly dwindling,” he said.

Since the second quarter of 2017, when Snap had $3.24 billion in cash, its cash balance has declined by double digits every quarter, falling to $1.4 billion as of its latest quarterly report.

Worse, the company’s cash from operating activities — what its core business earns, minus some major expenditures — has been shrinking by bigger and bigger amounts. And while some of that money is being invested in growth, most of it is funding the social media company’s day-to-day operations, Cramer said.

“As we’ve watched the company struggle and the stock go into freefall, I’ve started to wonder if Snap has enough money,” he said. “Just keeping the lights on at Snapchat is costing these guys a fortune. That’s not good.”

While Snap currently has no debt, a business that drains cash instead of generating it presents a “huge problem,” the “Mad Money” host continued.

The proximate cause, he explained, is that Snap spends a fortune on the cloud: with hundreds of millions of users uploading and downloading Snapchat content every day, the parent company has to pay for the digital space.

And even though Snap’s management laid out some lofty goals for the year ahead, namely turning a profit and stemming the company’s free cash flow losses, Snapchat’s total number of daily active users is now declining, Cramer warned.

“Snap’s growth is evaporating before our very eyes,” he said.

Add in Snap’s slowing revenue growth — up 44 percent in the latest quarter, down from 72 percent in the year prior and 285 percent at the IPO — and some high-level executive departures, and Snap’s future looks murky to Cramer.

“Until Snap gives us some reason to believe in a turnaround, it’s an ill-advised decision to buy the stock,” he concluded.

Shares of Snap ended Friday’s trading session up 1.72 percent at $6.51, dipping slightly in after-hours trading.

[“source=forbes]

SIDBI claims consortium of 6 public banks hold 56% stake in Capita World

SIDBI claims consortium of 6 public banks hold 56% stake in Capita World

Amid the row over a private entity handling the ‘loan in 59 minutes’ portal for micro, small and medium enterprises, SIDBI has claimed that a consortium of public sector banks led by it hold 56 per cent stake in the firm, thereby giving it a public character.

“A consortium of six public banks led by SIDBI held 56% in the fintech company @capita_world which gave it a public sector character,” Small Industries Development Bank of India said in a tweet.

The Congress Sunday accused Prime Minister Narendra Modi of benefitting “friends” by promoting private and crony capitalists at the expense of public institutions and demanded an independent judicial body probe into the new ‘under 59-minute loan scheme’ for MSME sector.

Congress leader Gaurav Vallabh demanded that the affairs of portal ‘www.psbloansin59minutes.com’, processing loans to small industries, be fully investigated, and its contract with the government should be cancelled as he alleged a “scam” into the entire matter.

The Congress leader alleged that the web portal is supported by public sector institutions such as SIDBI and PSU banks as partners, even though it is owned by Ahmedabad-based private company CapitaWorld Platform Pvt Ltd.

There was no immediate response available from either the government or the ruling BJP over the charges made by the Congress.

Vallabh alleged that the prime minister launched a new facility for MSMEs alongside a slew of measures for the sector, which incidentally stays battered for a long-term due to demonetisation.

He said a platform to facilitate quick loans was launched on November 2, 2018, with ‘pomp and promotion show typical in nature of various types of propaganda of this government’.

[“source=forbes]