Maybe you could consider comparing their financials instead of reading articles? They filed an S-1. It is all there for you.
I think when we look back at this in a few years, a lot of suckers will have been taken for a ride. There’s a lot of tremendous companies in tech but the NASDAQ is (i) historically volatile and (ii) at an all-time high…and here we are with a major IPO for a company that bleeds cash at a ferocious pace and likely won’t be profitable for many years (if ever). People are justifying the valuation based on metrics you would never find in an academic textbook or CFA curriculum – that is about as good of a sign of a bubble as I can think of. Not to mention the common equity in this IPO will have no voting rights.
I know people will say, “…but look at Facebook”. Facebook is a totally different. It was very profitable when it IPO’d and was a legitimate investment. There were actual cash flows generated that you could model out. I admit that I would have said the valuation was lofty at the time, but you actually had profits and cash flows to value. You’re so far from that with Snap that it is laughable. Snap may be as profitable in the future, but you have to discount those future profits/cash flows many years out in the future at a high discount rate to account for risk they never achieve those profits with their 26 year old CEO. Good luck.
but i think you are missing the fact that snapchat barely has revenues right now and is growing it exponentially. they are expecting to more than double their revs for 2017 from 360m to 1b. this type of business has crazy margins and is scalable. Facebook went from $1.5b revs in 2010 to $27b in 2016 and margins went from 70+% to 85%+. i’m not bullish on snapchat just because it is too early for me, but it can justify its valuation very easily with their organic secular growth. Also when zuckerberg started fb in 2004, he was only 19. both of these are social media ad cos. so its the same business. one is just more video oriented than the other. also on a side note, even fb to me is too young and too expensive.
voting rights are a non-issue to retail stock holders. I bought the class C GOOG shares because its cheaper and its night light im buying enough to make a dent. The finance industry hates them because they want to be able to put some idiot BB IB guy or MBB schmuck who can ruin the company even though companies fair way better with their founders running the show.
I honestly think the perfect time if you were ever to try and time an investment into one of these companies is to do so RIGHT before they have their first profitable quarter (easier said than done of course but I did it personally with Tesla back in 2013). Once they finally had a profitable quarter, stock went parabolic. Revenues are great but investors care about profit. Sounds so elementary after all the accounting and equity valuation metrics you can literally spend weeks, months, building models with but it is true.
Although not applicable to Snapchat anytime soon, Robert Shiller at Yale said once in a lecture something that from a theoretical standpoint really resonated with me and that is “As investors, we invest in stock for dividends”. I believe this to be true from a fundamental view.
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.
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.
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
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!
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 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.