Cramer Doesn't Like Snap — Even At $6

Investors looking to buy shares of social media company Snap Inc SNAP — which are near their all time-lows in the $6.50 range — should avoid the temptation, according to CNBC's Jim Cramer.

What Happened

Snap stock is down around 70 percent since the company's 2017 initial public offering, but even at current levels it is far from a "bargain," Cramer said Friday during his daily "Mad Money" show. The shares are still trading at a valuation of more than five times next year's sales estimates, which is "fairly expensive," he said. 

In addition to the unattractive valuation, the company's cash on its balance sheet has fallen by a double digit every quarter from $3.24 billion in the second quarter of 2017 to $1.4 billion in the most recent quarter, Cramer said.

Why It's Important

Snap's problems extend beyond its "dwindling" cash position, as its cash from operating activities, or core business earnings less some major expenditures, continues to fall at an even faster pace, Cramer said.

Granted, some of that cash is allocated to long-term investments in growth, but the majority of it is used to finance the company's day-to-day operations, he said. 

"Just keeping the lights on at Snapchat is costing these guys a fortune," Cramer said. "That's not good."

What's Next

Looking forward to 2019, Snap said it expects to turn a profit and improve its free cash flow losses. Yet there is reason to be skeptical of management's outlook, as Snap's "growth is evaporating before our very eyes," Cramer said.

Unless Snap offers investors a compelling reason to believe a turnaround is coming, it is an "ill-advised decision to buy the stock," according to the CNBC host.

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