What to Do After Snap Inc. [NYSE:SNAP] Blasts 44% Higher in IPO’s First Day of Trading…

What to Do After Snap Inc. [NYSE:SNAP] Blasts 44% Higher in IPO’s First Day of Trading…

Snapchat IPO

What is the Snapchat IPO?

Shares of Snap Inc. [NYSE:SNAP] blasted higher overnight by 44%, in what was the US market’s first initial public offering (IPO). The shares closed at US$24.48, following their listing at the IPO price of US$17.

Why did Snap shares rocket higher?

Snap Inc. operates the SnapChat app, which allows users to communicate and exchange photos with each other.

The attraction of the SnapChat app is that photos sent between users disappear within seconds of being received.

Due to its ease of use, it has become popular mostly among the demographic broadly labelled as millennials. For many in this demographic, it has usurped other social media websites and applications, such as Facebook and Instagram.

One of the gimmicks SnapChat has is that users can maintain a ‘streak’. This involves keeping in contact with someone at least once each day for a continuous number of days — hence a streak.

Therefore, in the desire to maintain a ‘streak’, it encourages users to remain engaged with the app and their contacts. That’s a unique feature of the app which you don’t find with other social media platforms such as Facebook or Instagram.

The popularity of the ‘streak’ function means that people will even ask friends to use their account for them if they’re unavailable in order to maintain their active streaks!

What now for Snapchat?

The challenge for SnapChat is how to successfully and sustainably maintain and grow revenues and profits. For the 2016 financial year, SnapChat Inc. recorded revenues of US$404.5 million, with a loss of US$514.6 million.

Both were an increase on the 2015 numbers, which came in at US$58.7 million and a loss of US$372.9 million respectively.

Other social media platforms have managed to monetise their user base. Facebook Inc. [NASDAQ:FB] has been the most successful — even though, in the early stages of its growth, it assured users that advertising revenues weren’t a priority.

But not all have succeeded. Twitter Inc. [NASDAQ:TWTR] saw rapid revenue growth, but its numbers have plateaued over the past two years, and the company has still failed to make a profit.

So, which will it be for SnapChat? Profit or loss? SnapChat certainly has the user base. The question is whether it can successfully turn that into big revenue growth and profits. At the moment, we remain unconvinced that’s possible.

By Kris Sayce

Kris Sayce

Kris Sayce

Publisher and Investment Director at Port Phillip Publishing
Kris is never one to pull punches when discussing market developments and economic events that can affect your wealth. He’ll take anyone to task — banks, governments, big business — if he thinks they’re trying to pull a fast one with your money. Kris is also the editor of Tactical Wealth, and Microcap Trader — where he reveals the best opportunities he’s discovered in the markets. If you’d like to more about Kris’ 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.
Kris Sayce is the Publisher and Investment Director of Australia’s biggest circulation daily financial email, Money Morning Australia.Kris is a fully accredited advisor in shares, options, warrants and foreign-exchange investments. Kris has close to twenty years’ experience in analysing stocks. He began his career in the biggest wasp’s nest in the financial world — the city of London — as a finance broker back in 1995.
It’s there where he got his ‘baptism of fire’ into the financial markets, specialising in small-cap stock analysis on London’s Alternative Investment Market. This covered everything from Kazakhstani gold miners to toy train companies.After moving to Australia, Kris spent several years at a leading Australian wealth-management company. However he began to realise the finance and brokerage industry was more interested in lining its own pockets with fat fees, commissions and perks —rather than genuinely helping out the private investors they were supposed to be ‘working’ for. So in 2005 Kris started writing for Port Phillip Publishing — a company which was more attuned to his investment outlook. Initially he began writing for the Daily Reckoning Australia— but eventually, took over Money Morning. It’s now read by over 55,000 subscribers each day. Kris will take anyone to task — banks, governments, big business — if he thinks they’re trying to pull a fast one with your money! Whether you agree with him or not, you’ll find his common-sense, thought-provoking arguments well worth a read. To have his investment insights delivered straight to your inbox each day, take out a free subscription to Money Morning here. Kris is also the editor of Tactical Wealth and Microcap Trader where he reveals the best opportunities he’s discovered in the markets that you could profit from. If you’d like to learn about the latest opportunity Kris has uncovered, take a 30-day trial of Tactical Wealth here or Microcap Trader here. Official websites and financial e-letters Kris writes for:

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