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Snap Chat IPO

so after a quarter or 2 of financials come out and its clear these people have no clue what they are doing and no real path to becoming profitable?

'A flute with no holes, is not a flute. And a donut with no hole, is a danish'

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Sweep the Leg: "I’m tired."
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is it just me or are you guys getting bombarded with questions about Snapchat? It’s borderline annoying because how do you value something with no profits? they ipoed too early imo. But then again market is expensive, in which case they should have sold a bigger piece of themselves. 

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Neryblop wrote:

is it just me or are you guys getting bombarded with questions about Snapchat? It’s borderline annoying because how do you value something with no profits? 

Same way anything is valued. Make an estimate of future profits and discount that back. Unfortunately visibility into the path to profits seems tough with these tech firms 

Tactics wrote:

Made a limit order of 100 @ $30, executed at $24 at open.

I’m hoping to ride the IPO euphoria and make a quick profit (will probably dump around $29-30).

Just having followed Twitter, Fitbit, Gopro, and Twilio, it seems like the “IPO Euphoria” premium is pretty high before people realize that the fundamentals don’t make any sense and start selling like crazy.

I very nearly did the exact same, but ultimately decided against it.  I feel like the pullback, if any, could be quick and significant (30%-50% would not be surprising to me), so I didn’t think the risk/reward made it worth it.  Will be definitely fun to follow.  Good luck!

Neryblop wrote:

It’s borderline annoying because how do you value something with no profits? 

There’s no point to valuing snapchat because the stock will trade at a stupidly high premium regardless. 

Fitbit at one point was trading at 90x earnings. How does that make sense for a company with declining margins and stalled growth? 
 

BValGuy wrote:

I very nearly did the exact same, but ultimately decided against it.  I feel like the pullback, if any, could be quick and significant (30%-50% would not be surprising to me), so I didn’t think the risk/reward made it worth it.  Will be definitely fun to follow.  Good luck!

I know exactly how you feel, which is why I only bought a few shares. With a stock like this that has no ties to fundamentals and valuation, at some point you’ll need a greed check and just take profits before the house of cards comes crashing down.

Tactics wrote:

Neryblop wrote:

It’s borderline annoying because how do you value something with no profits? 

There’s no point to valuing snapchat because the stock will trade at a stupidly high premium regardless. 

Fitbit at one point was trading at 90x earnings. How does that make sense for a company with declining margins and stalled growth? 
 

Still makes more sense than Twitter and all the rest of these wealth destruction machines. 

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Speculate with a smaller amount or else don’t do it. Ride the trump trade instead! : x

Looks like you’re already at your target level.  Selling or holding? I’d sell, but I’m also a bit of a pu$$y, which probably explains not pulling the trigger in the first place.

Greater fool theory.

Sweep the Leg: "I’m tired."
KMeriwetherD: "Well, you were basically Legolas in the Battle of Water Cooler."

BValGuy wrote:

Looks like you’re already at your target level.  Selling or holding? I’d sell, but I’m also a bit of a pu$$y, which probably explains not pulling the trigger in the first place.

I don’t know- is probably my most honest answer. This isn’t like Disney or Apple where you can base decisions based on your analysis, hold long-term and not lose sleep at night thinking about it. But my position is small and up a decent amount that I wouldn’t mind risking the run to continue. Holding through the weekend for now. Let’s see what Monday brings.
 

Had a stop on quote of $25 and got out before becoming a baggie.  Nice ride while it lasted. Lost some of the gains to greed, but retained a 4.2% gain.

I don’t think Snapchat is the same as FB when it comes to growth for years to come, but I do think the company has a lot of growth in atleast the next year or possibly 2. Snapchat has had insane growth and as for the monetization of users they can imitate other social network companies like FB and Twitter. The stock is hard to value now so im not surprised with the crazy price swings but I believe there is some more upside to this price. I think selling now would be a mistake but we will see. Im going to ride it out for a bit.

This thing will be $15 before you know it…

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Tactics wrote:

Neryblop wrote:

It’s borderline annoying because how do you value something with no profits? 

There’s no point to valuing snapchat because the stock will trade at a stupidly high premium regardless. 

Fitbit at one point was trading at 90x earnings. How does that make sense for a company with declining margins and stalled growth? 
 

I agree - that valuation made absolutely no sense for FIT and ultimately that’s why the stock crashed! The analyst expectations out of the gate were totally insane and ultimately wrong, since as you said growth did stall and margins got eroded.

You’re making a similar bet in a sense with SNAP - that they can grow from negative gross margin in 2016 to 70%+ in 2020 and 100%+ revenue CAGR between now and that time. It’s far from a given unless they can re-accelerate active user growth, and even if they do that’s no small feat with respect to profitability since they went IPO with like 10% of FB’s active user base when FB went public, and it’s hard to say whether SNAP’s renting of datacenters (rather than owning them) creates a longer-term competitive disadvantage vs. FB and GOOG who actually own the most valuable asset there is: data.

We have met with SNAP pretty extensively over the years, and ultimately participation in the IPO made sense because the deal was 10x over-subscribed (and so even huge funds got a very small slice of their requested allocation – something like 5-10% was not atypical). Moreover the trade was much more a capital markets play rather than a fundamental upside vs downside.

You really have to make a bet that SNAP will continue to target the millennial and teenager demographic than any other company out there, though it’s hard to think the stock would perform that badly in the near term since this is a demographic that almost everyone else has struggled to solve (including FB and GOOG) and advertisers are definitely willing to give them time to prove themselves. That said, if the DAU’s keep decelerating or ARPU fails to scale the way investors expect, there’s not much downside protection. In fact, while ad revenues per user on SNAP are much lower than FB, it’s also a much less scaled platform and likely to be far less scalable in terms of time spent.

Anyway, a bunch of sell-side initiated coverage today and to get to eve 20% upside from here, you’re talking a 20x EV/revs multiple on a huge 2018 growth number. That said, my basic view is that it is too early to tell how this all turns out and there’s a ton of fast money in the name so get brace yourselves for the ride…

Instagram just launched the ability to send your friends self destructing pics and video (I saw it today pop up as a notification) they already stole stories, I just dont see how SNAP is going to be able to maintain the userbase when Instagram/Facebook can just take their hard work and rip it off and realistically throw a lot more assets behind it. I dont think the SNAP creator is an idiot, but Zuckerberg appears to be king of the social media realm and investing in SNAP is basically betting against him at this point. He seems to have his sights on destroying Snapchat

'A flute with no holes, is not a flute. And a donut with no hole, is a danish'

frisian wrote:

Interesting article regarding analyst coverage of Snapchat.

http://www.businessinsider.com/morgan-stanley-corrected-snapchat-research-to-lower-earnings-forecast-2017-4

I laughed so hard when I saw the article a couple weeks back. Totally unreal. Snap management really hadn’t given much guidance to sell-side during the IPO roadshow process, but to be off by such a wide margin on EBITDA assumptions to essentially have to be reigned in by management, and only to then try to remedy the situation by using some ridiculous WACC…well, when I see things like that it gives me more confidence that active management isn’t dead because you can have analysts like the MS team on the opposite end of your trades. Really hilarious.

word is snap is growing faster than ig in the >35 demo

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ohai wrote:

This thing will be $15 before you know it…

Gotta say, it feels nice to know that the majority of us commenting on this thread get to see our negative shared sentiment on SNAP from a couple months back turn into reality today. Props to those who agreed and that magical profit turning quarter seems a distance dream : /

They’re ****ing up big time. I’m seeing ads for like gay dating. Whoever their ad guy is is an idiot and should get fired. 

With that said I saw their febreeze ad and bought a bunch at Costco because of it.

I love my cheese. I got to have my cheddar.

Nerdyblop wrote:

They’re ****ing up big time. I’m seeing ads for like gay dating. Whoever their ad guy is is an idiot and should get fired. 

Maybe you should be asking yourself why you are getting gay dating ads targeted to you?

rawraw wrote:

Nerdyblop wrote:

They’re ****ing up big time. I’m seeing ads for like gay dating. Whoever their ad guy is is an idiot and should get fired. 

Maybe you should be asking yourself why you are getting gay dating ads targeted to you?

boom

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I’m straight mother ****ers lol

I love my cheese. I got to have my cheddar.

Stocks like this can have a snowball effect as they go lower. This company burns millions of dollars of cash every single day. They can only fund these losses w/ dilutive share issuance, which works great when your stock valuation is very high. The stock valuation is still really high in my opinion, but when the stock goes lower it becomes even more dilutive to issue new shares. It is a real house of cards. Once the market loses faith they are screwed b/c the high stock valuation is their only source of cash, which is precious to them considering their massive losses. It is all about the market’s perception of growth – once that erodes Snap is done. They still have plenty of cash so liquidity isn’t a concern right now but it will be again at some point.

I don’t think this is a stock where you can buy the dip. If this goes to single digits, it has real problems. Debt capital will not be available to them, only equity and if it goes lower it just gets worse for them. They can try to preserve cash/liquidity but that normally means less growth and hence lower valuations.

All you have to do is look at the cash flow statement. It ain’t pretty.

closed below IPO today

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RIP

I use Snapchat a lot and I am telling you they are not using that many ads. They can easily bombard me with more 5x more ads and I won’t find it annoying. Also the quality of the ads is very good and funny and most importantly short. I think their ads are only at it’s infancy. once they master it, I bet they will post more ads and people will pay more to advertise on it. It’s also a good play to follow sports news, and papparazi news, and other tips on how to live life. chicks posting hot pics of themselves is a huge plus.

I love my cheese. I got to have my cheddar.

rawraw wrote:

Nerdyblop wrote:

They’re ****ing up big time. I’m seeing ads for like gay dating. Whoever their ad guy is is an idiot and should get fired. 

Maybe you should be asking yourself why you are getting gay dating ads targeted to you?

Oh snap(chat)