Snap is set to open near a record low after analyst reportedly says it's 'quickly running out of money'

  • Snap is sliding ahead of Tuesday's opening bell after MoffettNathanson analyst Michael Nathanson reportedly slashed price target, saying the company is "quickly running out of money."
  • Last quarter the social-media company reported its first-ever decline in sequential daily active users and said its cash burn was up in the second quarter.
  • CEO Evan Spiegel recently sent out an internal memo admitting the company moved too fast in 2018 and laid out a path to profitability in 2019, but Nathanson is skeptical.
  • Watch Snap trade in real time here.

Snap shares are down about 3% ahead of Tuesday's opening bell —and set to open near a record low — after  MoffettNathanson analyst Michael Nathanson slashed price target to $6.50 from $8, saying the social-media company is "quickly running out of money."

By the Nathanson's calculation, Snap needs a capital raise in the middle to end of 2019, as reported by StreetInsider.

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Snapchat CEO Evan Spiegel
Snap cofounders Evan Spiegel (C) and Bobby Murphy (L) sign a book before ringing the opening bell of the New York Stock Exchange (NYSE) with NYSE Group President Thomas Farley shortly before the company's IPO in New York, U.S., March 2, 2017. REUTERS/Brendan McDermid
Founder of Snap Inc. Evan Spiegel attends the 2017 Berggruen Prize Gala at the New York Public Library on December 14, 2017 in New York. / AFP PHOTO / ANGELA WEISS (Photo credit should read ANGELA WEISS/AFP/Getty Images)
Evan Spiegel, co-founder and chief executive officer of Snap Inc., stands on the floor of the New York Stock Exchange (NYSE) during the company's initial public offering (IPO) in New York, U.S., on Thursday, March 2, 2017. Snap Inc., maker of the disappearing photo app that relies upon the fickle favor of millennials, jumped in its trading debut after pricing its initial public offering above the marketed range. Photographer: Michael Nagle/Bloomberg via Getty Images
CULVER CITY, CA - NOVEMBER 12: Model Miranda Kerr (L) and Snapchat founder Evan Spiegel attend the Fifth Annual Baby2Baby Gala, Presented By John Paul Mitchell Systems at 3LABS on November 12, 2016 in Culver City, California. (Photo by Stefanie Keenan/Getty Images for Baby2Baby)
NEW YORK, NY - FEBRUARY 01: CEO and co-founder of Snapchat Evan Spiegel speaks onstage with The New Yorker staff writer Ken Auletta at the American Magazine Media Conference at Grand Hyatt New York on February 1, 2016 in New York City. (Photo by Larry Busacca/Getty Images for Time Inc)
NEW YORK, NY - FEBRUARY 01: CEO and co-founder of Snapchat Evan Spiegel speaks onstage with The New Yorker staff writer Ken Auletta at the American Magazine Media Conference at Grand Hyatt New York on February 1, 2016 in New York City. (Photo by Larry Busacca/Getty Images for Time Inc)
NEW YORK, NY - FEBRUARY 01: The New Yorker staff writer Ken Auletta and CEO and co-founder of Snapchat Evan Spiegel attend the American Magazine Media Conference at Grand Hyatt New York on February 1, 2016 in New York City. (Photo by Larry Busacca/Getty Images for Time Inc)
SUN VALLEY, ID - JULY 08: Evan Spiegel, co-founder and CEO of the mobile application Snapchat, attends the Allen & Company Sun Valley Conference on July 8, 2015 in Sun Valley, Idaho. Many of the world's wealthiest and most powerful business people from media, finance, and technology attend the annual week-long conference which is in its 33rd year. (Photo by Scott Olson/Getty Images)
SAN FRANCISCO, CA - OCTOBER 08: Snapchat CEO Evan Spiegel speaks onstage during 'Disrupting Information and Communication' at the Vanity Fair New Establishment Summit at Yerba Buena Center for the Arts on October 8, 2014 in San Francisco, California. (Photo by Kimberly White/Getty Images for Vanity Fair)
SAN FRANCISCO, CA - OCTOBER 08: Snapchat CEO Evan Spiegel speaks onstage during 'Disrupting Information and Communication' at the Vanity Fair New Establishment Summit at Yerba Buena Center for the Arts on October 8, 2014 in San Francisco, California. (Photo by Michael Kovac/Getty Images for Vanity Fair)
Evan Spiegel and Bobby Murphy attend the 'TIME 100 Gala, TIME's 100 Most Influential People In The World' at the Frederick P Rose Hall at Lincoln Center in New York City. � LAN (Photo by Lars Niki/Corbis via Getty Images)
LOS ANGELES, CA - FEBRUARY 07: CEO of Snapchat Evan Spiegel (L) and music producer Jimmy Iovine attend the Pre-GRAMMY Gala and Salute to Industry Icons honoring Martin Bandier at The Beverly Hilton Hotel on February 7, 2015 in Los Angeles, California. (Photo by Michael Kovac/WireImage)
SAN FRANCISCO, CA - SEPTEMBER 09: Evan Spiegel of Snapchat attends TechCruch Disrupt SF 2013 at San Francisco Design Center on September 9, 2013 in San Francisco, California. (Photo by Steve Jennings/Getty Images for TechCrunch)
Evan Spiegel and Bobby Murphy, developers of Snapchat (Photo by J. Emilio Flores/Corbis via Getty Images)
SAN FRANCISCO, CA - FEBRUARY 10: Jordan Crook of TechCrunch and Evan Spiegel of Snapshot (L-R) present the award for Fastest Rising Startup at the 7th Annual Crunchies Awards at Davies Symphony Hall on February 10, 2014 in San Francisco, California. (Photo by Steve Jennings/WireImage)
Snap cofounders Evan Spiegel (C) and Bobby Murphy ring the opening bell of the New York Stock Exchange (NYSE) with NYSE Group President Thomas Farley shortly before the company's IPO in New York, U.S., March 2, 2017. REUTERS/Lucas Jackson
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Snap's second-quarter earnings, released on August 7, showed the company topped both the top and bottom lines, but that it suffered its first-ever decline in sequential daily active users. Additionally, the company's cash burn jumped to $234 million from $229 million in the same quarter of 2017. 

The decline in user trend "was primarily driven by a slightly lower frequency of use among our user base due to the disruption caused by our redesign," CEO Evan Spiegel said on a call with analysts after the earnings report.

In February, Snapchat released a controversial app redesign that triggered backlash from users — including celebrities like Kylie Jenner, who tweeted to her 24.5 million followers, "Sooo does anyone else not open Snapchat anymore?The main complaint was the redesign separated celebrity Snapchat stories from those that came from your friends. Jenner's tweet wiped out more than $1 billion from Snap's market capitalization in a single day. 

Last Week, Spiegel sent out an internal memo running over 6,500 words long, admitting the company moved too fast in 2018 — specifically referring to the controversial Snapchat redesign — adding that Snap has "lost the core of what made Snapchat the fastest way to communicate." The internal memo outlined company-wide goals for 2019, including accelerating revenue growth and achieving full-year positive free cash flow and profitability.

Commenting on Spiegel's internal memo, Nathanson, according to StreetInsider, said he is "skeptical" and that he doesn't "have faith in Snap’s leadership to navigate these rapids."

Snap was down 51% this year through Monday.

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