Snapchat entered the stock market today priced at $17, and is ready to start trading despite the fact that analysts don’t really know what to make of the company and their direction in the marketplace. To date, the company has struggled to become cash positive and create effective revenue to offset costs. Daily Active User count has started to stall around ~150 Million and it is unclear how the service plans to grow overseas despite its US popularity. The app is considered wildly popular with people age 18-24, and this market has the most potential for marketers dive in with target messaging. The app and company has 200 million shares for sale in this initial offering, worth roughly $3.4 Billion dollars.
Typically, IPOs are viewed as ways to get into a stock with a high chance of growth. While the company is growing and becoming a social symbol in the culture, the company is strangely not offering an ownership stake with each share purchased but instead is retaining complete company control with the sale. Another factor which should be on your mind before purchasing is that the market is touching some of its highest average Price to Earnings or P/E Ratios ever in recent years. This is a sign that companies are doing well but the market may be overrunning the value of what corporations actually are worth.
Snapchat has a lot of risk as technology companies are never as predictable as other new IPO entrants. Facebook fell nearly 54% in its stock valuation before slowly regaining its footing and posting over a 200% gain from the initial offering price. Twitter on the other hand had a similar user base during its IPO, but the share price has fallen since the service has failed to find effective monetization on its platform. Snapchat has partnered with traditional media and online outlets to make monetized stories, they have created ad based filters for users, and even tried to sell physical snapchat glasses. However, no one can tell for sure if these are going to pan out into long term profit or short term heartache.
Clearly there is an audience for Snap and its services. The real question is can these users be turned into a profit as they age, and does the company justify $17 per share for a chance to get in on the profit? The real question is, “To Snap or not to Snap”.