Jim Cramer warns against buying shares of Snap Inc.

Credits - CNBC

The stock prices of Snap Inc have fallen down to $6 per share which is about 70 percent down from where the initiation of the stock was in the public trading. On Friday, Jim Cramer stated that investors should not be fooled by such low prices.

He further warned the public that they shouldn’t be tempted by the $6 share price of the Snap and then change the share price because it’s not a bargain.

He further added that at estimation that the sales of the next year might be five times more and in that scenario these stocks are pretty expensive and also that there are some very alarming long term trends.

Credits – Market Watch

Cramer, who is the host of “Mad Money” said that the most worrisome thing about him is cash generation of the parent of Snapchat. In 2017, when Snapchat was launched, it had only $1 billion on the balance sheet. During then this was the last thing that worried its investors but now there is a dwindle in the cash-hoarding of the Snapchat according to Cramer.

In the second quarter of the fiscal year 2017, Snapchat had cash of $3.24 billion and ever since then its balance of cash has plummeted, decreasing by double digits almost every quarter. It has now reached a worth of $1.4 billion according to the quarterly reports of the latest quarter of the current fiscal year.

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What is even worse is the part that the income of the company from its core business minus certain major expenditures has been declining by larger and larger amounts. Some of this income is being invested by the company in the growth but a major chunk of it is used for funding of the social media for the day to day operations of the company, as was stated by Cramer.

This is a case of serious worries for the company as well as the investors.

Source – CNBC, Market Watch

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