Snap's CFO Departure 'Raises Additional Concerns,' Analysts Say

Snap Inc SNAP needs to find a new chief financial officer after Tim Stone resigned from his position after just eight months on the job. The company said Stone's resignation is "not related to any disagreement with us on any matter" although it is raising some red flags among Street analysts.

The Analysts

• Bank of America's Justin Post maintains a Neutral rating on Snap with an unchanged $7 price target.
• Pivotal Research Group's Brian Wieser maintains a Hold rating on Snap with an unchanged $6 price target.
• RBC Capital Markets' Mark Mahaney downgraded Snap from Outperform to Sector Perform with an unchanged $8 price target.

Shares were down more than 12 percent to $5.75 at time of publication Wednesday afternoon.

Bank Of America: Why Is Stone Leaving?

Investors are left wondering why Stone is leaving Snap so soon after moving on from a 20-year career at Amazon.com, Inc. AMZN, Post said in a research note.

Stone's departure is part of a growing list of high profiled executives who quit Snap, including head of HR Jason Halbert and Head of Global Strategic Partnerships Elizabeth Herbst-Brady this year alone. Last year's high-profile executive departures include Vice President of Content Nick Bell and Chief Strategy Officer Imran Khan.

Investors also have reason to become "incrementally cautious" that the many management changes creates new execution risks, the analyst wrote. A bearish stance on the stock can't be justified at this time as Snap also said its fourth-quarter revenue and EBITDA will come in near the high end of its previously reported guidance.

Pivotal: Is CEO Spiegel The Problem?

Stone's resignation could be a function of CEO Evan Spiegel's leadership traits, Wieser said in a note. Specifically, media reports related to the "heightened centrality" could impact his managerial stability although this is a common trait among venture-stage companies.

Another factor that could have impacted Stone's departure is Snap's stock performance, which is down 50 percent over the past six months alone and represents a "substantial" part of executive compensation.

In conjunction with the executive departure, Snap's encouraging guidance makes Stone's resignation essentially offset by the "positive operating trends," the analyst said.

RBC: Material Negative

Stone's departure should be seen as a "material negative" since he left a successful career at Amazon but resigned less than one year into his new role at Snap, Mahaney said. The firm's downgrade of Snap's stock is tied to Stone's departure as the executive was counted on to help improve Snap's "uneven" fundamentals and performance. As such, the likelihood of a sustainable turnaround at Snap has now "been lessened."

Related Links:

Analyst Sees Android Redesign As Catalyst For Snap To 'Regain Swagger'

DAU Drop Off, Lack Of Originality: Analysts Aren't Impressed With Snap