Citi Downgrades to Neutral on Snap’s Reported Layoffs and Departure of Senior Executives
Snap shares are down more than 7% on news that the business plans to lay off 20% of its staff.
Given that Snap employs almost 6,500 individuals, the proposed layoffs will affect around 1,300 workers. The Verge says that layoffs will start today and that some industries will be “severely” affected.
These include the hardware section of Snap, which makes products for augmented reality (AR), and the mini-app and game development industries.
In reaction to the story, a Citi analyst downgraded Snap from Buy to Neutral and lowered the price target from $16 to $10.
“Snap’s use is still pretty strong, but we have downgraded the stock to Neutral/High Risk and lowered our expectations to account for persistent monetization hurdles and execution risk,” the analyst wrote in a client letter.
Related: Musk sells $6.9 billion in Tesla shares, citing a Twitter deal.
In addition to the layoffs, the analyst is upset that Snap’s chief business officer and head of North American ad sales are leaving to join Netflix.
An analyst at Bank of America thinks that laying off workers could save the social media business over $200 million a year in operating costs.
“Both Ms. Gorman’s planned departure and a reorganisation that includes layoffs could hurt sales over the next few quarters, and Wall Street would likely not like it.In a client note, the analyst also said that Netflix’s hiring of high-profile advertising executives could make the online advertising market even more competitive.
A KeyBanc analyst said that Gorman’s leaving Snap would cause “more worries about Snap’s ad recovery and position compared to rival social platforms.”
