Here we are in the post-Snapchat IPO world, and not much has changed. I feel like I shouldn’t have to tell you this, but it’s important to remember not to buy $SNAP. Now, and probably ever.
I have nothing against the video-based social media company, their time sensitive messaging hook, or their ubiquitous and colorful animated lenses. But Snapchat shows no signs of being anything but a flash in the pan, and the stock is already trading below IPO, like we all knew it would.
If you want to know more, read on. There are lessons to be learned from Snapchat.
— Domain Mondo (@DomainMondo) March 7, 2017
A Deeper Look at Snapchat
Snapchat is a wildly impressive app, started by students at Stanford back in 2011. From there, they have swollen their user base to 158 million. In February, they made their first hardware available – a pair of smartglasses with built in camera.
Snapchat is pretty much a household name at this point, but their user base is dwarfed by last-gen Social media giants like Facebook and Twitter. This could mean that Snapchat has a lot of growth yet to come. But in the world of app novelties, that future is far from certain.
For one thing, Snapchat isn’t remotely profitable. They might never be. What’s more, having resisted a Facebook buyout, Snapchat is facing declining new user uptake, as the larger SM giant bulks up its new Snapchat-competitor service: Instagram Stories.
Basically, people who use Snapchat use it a lot, but there isn’t a flood of new users. Days after IPO, is it possible that Snapchat has peaked?
There’s no way to know, but there is plenty of other cause to stay away from $SNAP.
- Snapchat had $463.1 million in 2016. Their revenue target for 2019 is $3.3 billion. Anything short of astronomical growth will fall far short.
- Snapchat lost $514.6 million in 2016. It lost $372.9 million in 2015. Current projections show profitability no sooner than 2020, if ever. Will people even use Snapchat in 2020?
- Snapchat has been referring to itself as a camera company of late, probably to differentiate itself from Facebook. Assuming that pivot lasts, is this an industry in which Snapchat can be any more successful?
There are those who are bullish on Snapchat. Even though I am not clearly one of them, I would avoid $SNAP simply because IPOs are almost never good buys. Remember, IPO stands for “It’s Probably Overpriced”.
Is it Time to Buy $SNAP?
No. Don’t do it.
Snapchat can’t compete against Facebook. Facebook is a layer that runs beneath our entire society. Snapchat is a frivolity. It may surprise, grow, and become profitable, but in that time I think your money could do better with Facebook.
Snapchat is a lottery stock. It might be the next big thing. But as with all sleek sexy IPOs, there is an awful lot to lose. If you really want $SNAP in your portfolio, wait a week or two. It’ll be cheaper.