Snap Provides Restructuring Plans, Announces New Strategic Priorities: What Investors Need To Know

Snap Inc SNAP shares fell Wednesday morning after the company confirmed reports that it planned to cut about 20% of its employees. However, the stock reversed course and surged higher after the company announced restructuring plans.

What To Know: Snap laid out plans to increase focus on three new strategic priorities: community growth, revenue growth and augmented reality. The company also highlighted its path to profitability and provided preliminary results.

Snap said current quarter-to-date revenue growth is approximately 8% year-over-year, which is well below company expectations, according to a memo CEO Evan Spiegel sent to employees on Tuesday. 

"While we have built substantial capital reserves, and have made extensive efforts to avoid reductions in the size of our team by reducing spend in other areas, we must now face the consequences of our lower revenue growth and adapt to the market environment," Spiegel said.

In the investor update Wednesday, Snap said it will substantially reduce or completely eliminate any investments that are not directly related to the company's three strategic priorities. Some areas that it will cut back on include Snap Originals, games, hardware (Spectacles) and other standalone apps. 

The company will ramp up its focus in several areas in order to create a clear path to profitability and free cash flow. Snap's plans include the aforementioned 20% workforce reduction, efficient scaling of infrastructure costs, content investments that drive community engagement, the lowering of marketing investments and a reduction in real estate overhead. 

Snap expects these strategic actions to result in $500 million in estimated reduction in its annualized cash cost structure relative to the second quarter. 

Snap also noted that it has completed the $500 million buyback that it announced alongside its second-quarter earnings report. The company repurchased 3.1% of outstanding shares at an average price of $9.75.

SNAP Price Action: Snap has a 52-week high of $47.71 and a 52-week low of $9.34.

The stock was up 14.7% at $11.49 at press time, according to Benzinga Pro.

Photo: www_slon_pics from Pixabay.