Snapchat Owner Snap Smacked On $25 Billion Valuation Target
By Brian Deagon, February 3, 2017
Reviews of the initial public offering of Snapchat owner Snap Inc. are in, with analysts displaying skepticism and warnings.
"Snapchat is still very early in generating revenue, so investors will have to take a leap of faith to become true believers," said Rohit Kulkani, head of SharesPost Research.
Facebook was farther along in monetizing its user base at its IPO than Snapchat is at its IPO, he wrote, adding that "Snap is unlikely to report a profit for at least another 12-18 months because it will remain in heavy investment mode."
Notable positives include Snap's large and growing addressable market. Also, the user base is "unique and highly attractive."
"Snapchat is a brilliant idea that has changed the way Millennials around the world communicate with one another," Kulkani wrote. "Snapchat has captured the hearts and minds of this demographic by being fundamentally different from Facebook and Twitter. Snap's unique hold on Millennials is partly responsible for its lofty valuation."
But with the positives came the negatives.
"To me, Snap is Twitter 2.0 — a company with a good growth rate that is losing a ton of cash, coupled with a massive valuation," wrote Brian Hamilton, chairman and co-founder of Sageworks. "If the estimates on valuation are in the ballpark, early investors in the IPO are going to be subject to tremendous downside risk," Hamilton wrote.
Snapchat will trade on the NYSE under the ticker SNAP. The lead underwriters are Morgan Stanley, Goldman Sachs and JPMorgan.
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