Should You Invest in the Snapchat IPO?

Should You Invest in the Snapchat IPO?

What is the Snapchat IPO?

Snap Inc [NYSE:SNAP] is the company behind social media heavyweight Snapchat. After extraordinary growth over the last few years, Snap Inc has decided to go public. It’s now joining the likes of Facebook Inc. [NASDAQ:FB] and Twitter Inc. [NYSE:TWTR] as another social media platform to offer up shares to investors.

What’s the deal with the Snap Inc. IPO?

Snap Inc. has now come out and let the market know that the initial public offering (IPO) will be at US$17 per share. This puts an initial valuation on the company at US$24 billion. Not bad for a company only founded five and a half years ago.

You will see the IPO hitting headlines around the world. You will see a lot of excitement and hype building up about it. You will hear people calling it the ‘next Facebook’. But the question that everyone is asking me right now is, ‘Should I invest in the Snapchat IPO?’

Well, you can decide for yourself. But in my view this could be an IPO built on hype and excitement, which long term might play out more like Twitter than Facebook.

What now for the Snapchat IPO?

Let me give you some perspective before you decide one way or the other about the Snapchat IPO.

They are listing at US$17, market cap around $25 billion or so. Their monthly active user numbers, according to Statista, is around 301 million. In terms of daily active users, Snap has around 158 million.

The comparison people are using is that Snap could be the next Facebook. However, Facebook too once traded at $19, and had a similar market cap at around US$38 billion. This was back around August 2012, not long after they went public.

At that point Facebook already had 1 billion monthly active users. They also had around 584 million daily active users.

If the revenue model that Snap is looking to make money on is advertising, then this valuation appears to be high compared to Facebook. If they’re also looking to generate revenues from product sales (camera glasses, drones and other ‘smart’ devices) then in my view they’re still too highly valued, and battling too strong competition.

Sure, Snap could continue to grow. But they might be reaching a peak for daily active users. From Q3 to Q4 2016 Snap went from 153 million daily active users to 158 million daily active users, just 3% growth quarter on quarter.

The way I see it, Snap looks more like heading the way of Twitter than the way of Facebook.

To find out more about companies like Snap or any kind of publicly listed company, buying stocks and investing in the markets, you can download a free report here that will explain everything you need to know and more.

Sam Volkering,
Money Morning

Sam Volkering
Sam is Editor for Money Morning and it's small-cap and technology analyst. He spends his time hunting down the most exciting stocks on the planets, whether they’re potential-packed volatile small-caps or tech firms transforming our future through cutting-edge technologies. You can find more of Sam’s work over at Australian Small-Cap Investigator, where he shares the best small-cap stocks he finds on the ASX, or at Revolutionary Tech Investor where he reveals the latest breakthrough tech investment he’s discovered. If you’d like to more about Sam’s financial world view and investing philosophy then join him on Google+. It's where he shares investment insight, commentary and ideas that he can't always fit into his regular Money Morning essays.
Sam Volkering is Editor for Money Morning and its small-cap and technology analyst. He’s not interested in boring blue-chip stocks. He’s after Australia’s rising stars — companies whose shares trade for cents on the dollar — and are often shunned by those in the financial services industry. His mission is to make you big money, from small stocks.
If you’d like to learn about the specific companies Sam is recommending you buy for turbo-charged stock returns, take a 30-day trial of his small-cap investment advisory Australian Small-Cap Investigator here. But that’s not where Sam’s talents end. From discovering the Apple 2e and Macintosh in the mid-80s, to the rise and fall of the Mini Disc in the 90s…to building internet apps in the 00s...Sam is an amazing talent at finding new, cutting edge technologies and translating that research into how the future will look — and where the opportunities lie.It’s his job to trawl the world to find, analyse, research and — in the right situation — recommend investments in the world’s most innovative and technologically advanced companies.He recommends the best ones he finds in his breakthrough technology investment service Revolutionary Tech Investor.This revolutionary investment advisory is dedicated to finding the best ways to profit from technological developments across the globe. If the best action is in Australia, Sam will find it. If it’s in Silicon Valley, Frankfurt or Tokyo, Sam will find it there too.To find out more about how Revolutionary Tech Investor can help you profit from breaking developments in the tech world click here to take a 30-day no-obligation trial today. Official websites and financial e-letters Sam writes for: (You can find a list of recent articles written by Sam at the bottom of this page.)

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