Snap’s stock price hard to justify

One well-connected parent, Barry Eggers, made it happen for the Catholic St. Francis High School by convincing the school’s board to take a risk on Snap Inc., which had a blockbuster initial public stock offering Thursday. The company is now worth $34 billion, which means it is worth three times as much as Twitter, CNNMoney reported. The company’s share price fell by 12% on Monday to $23.79, under its opening price of $24. “We collectively decided that this was going to be a. small investment”. “The school’s investment in Snap has matured and given us a significant boost”. Can Snapchat rise enough to justify the massively premium valuations?

Snap’s Wall Street honeymoon may be over.

As TechCrunch notes, many companies are apprehensive of going public because of the possibility that they could have a market cap that’s lower than their last private round.

Gartner analyst Brian Blau sees Snap continuing that focus. NBCU is the only US media company with an investment in Snap and it was reported by CNBC that NBCU has agreed to hold its shares for at least one year.

Investors could be eying Facebook, valued at $400 billion, or Google, at $600 billion, and think Snap has a similar long runway ahead. The analyst has a $22 price target with a “Neutral” rating on the stock.

Snap Inc.’s stock market debut last week has been celebrated as a success in the tech world as its share price surged in their first two days on the market.

Among the investment positives, she wrote, is that Snapchat users are clustered in the age range of 13-to-34 years old, considered “an advertisers dream”, Martin wrote. But today, some analysts are already saying “sell”. Snapchat operates in a relatively niche fast-paced market and competition is fierce.

Would you buy stock in a company that lost money?

By comparison, Twitter was trading at around $15.70 a share, while Facebook was at $136.85. In Snap’s case, the shares closed at $24.48 on March 2. So, if you are a pre-IPO investor, sell the stock and run. Why?

Snap co-founders are hoping to convince investors that they not having a voice in the company isn’t a bad thing. User growth on the app slowed in the fourth quarter, leading to skepticism about how big the company’s advertising business could be. At these valuations, a miss on growth (users or revenue) will not go unpunished. Forcing users to watch ads will likely drop daily active users and could significantly harm snapchat. Instagram stories directly mirror Snapchat’s own stories feature. With the stock trading at around 32 times this year’s sales, “based on that, it’s overvalued right now”.