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Snap won't make money until 2027, analyst says

Brian Sozzi
·Executive Editor
·2-min read

Snap may not turn a profit until the lead-up to the 2028 presidential election, according to one analyst.

"We don't think Snap is due to generate any earnings until 2027," Jefferies analyst James Heaney warned on Yahoo Finance Live (video above).

Heaney downgraded Jefferies' rating on Snap a week ago to Hold from Buy, citing overly optimistic estimates on ad sales amid a challenging 2023 economic outlook.

"Our base case now is that 2027 is when they turn a profit, and that is based on a more recessionary environment," Heaney added. "So I think the Street is a little bit more optimistic in terms of when Snap can become a profitable company."

The Street expects Snap to turn a net profit in 2023 to the tune of $222 million. But to Heaney's point, the estimates could prove too bold.

For the nine-months ended Sept. 30, Snap had a net loss of $1.1 billion. A year ago at that time, Snap's net loss tallied about $510 million.

And despite cutting 20% of its workforce earlier this year in an effort to reach profitability, the company notched a lackluster third quarter. Snap continued to blame an advertising slowdown and Apple's privacy changes for its missteps in execution while also warning that sales trends in the fourth quarter would get worse.

CEO of Snap Inc. Evan Spiegel demonstrates Spectacles onstage at the virtual Snap Partner Summit 2021 on May 20, 2021 in Los Angeles. (Photo by Snap Partner Summit 2021 - Snap Inc/Getty Images for Snap Inc)
CEO of Snap Inc. Evan Spiegel demonstrates Spectacles onstage at the virtual Snap Partner Summit 2021 on May 20, 2021 in Los Angeles. (Photo by Snap Partner Summit 2021 - Snap Inc/Getty Images for Snap Inc) (Snap Partner Summit 2021 - Snap Inc via Getty Images)

Snap's stock has crashed 82% so far in 2022 amid continued disappointing financial showings.

"We believe it highly likely that tougher market conditions are leading to a consolidation of ad spend with the largest platforms (Google and Facebook) and to those platforms that provide on-platform and highly measurable conversions (Google again and Amazon and a few other places)," Evercore ISI analyst Mark Mahaney wrote in a recent note. "And we think it likely that the recent major personnel changes at SNAP – the loss of key ad execs to Netflix – has exacerbated the headwinds."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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