SNAP Stock Price
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With the recent Morgan Stanley (NYSE:MS) downgrade, the company is definitely on the back foot and doesn’t appear to be inching closer towards Facebook levels of success. In fact, the SNAP stock IPO price per share was higher when it was initially released than it is today. To sum things up, all is not well in the Snap kingdom.
Twitter Stock vs. Snap Stock
Ironically, Snap founder and CEO Evan Spiegel deliberately went out of his way to avoid falling into the same pitfall as Twitter when he was preparing for the SNAP IPO.
Early on, Twitter famously bandied about high growth rate numbers and user numbers in order to justify its valuation, but the growth eventually slowed, and the Twitter stock price dried up with it.
Evan Spiegel and co. went out of their way to avoid resembling Twitter, and the pitch worked, at least at first.
The Snap stock IPO price per share shot up to about $24.00 in the early days, even though it started trading at $17.00 per share. That huge gain would last about a day or two before the stock began tumbling back to earth.
So is Snap stock going to be the next Twitter stock? I’d say yes. There are just too many red flags right now that make me wary of SNAP stock.
First, remember that its valuation was absurdly bloated. The Snap valuation ended up being around $28.3 billion at its IPO, which—divided by its revenue in 2016—results in a value that is 70 times more than its revenue.
Instagram Competition and Snap Ad Dollars
Snap ad products and Snap ad dollars are what the company runs on. It said as much in its SEC filings. (Source: “FORM S-1,” U.S. Securities and Exchange Commission, February 2, 2017.)
So when Morgan Stanley downgraded the company, a big part of that downgrade was based on weakening growth numbers and Snap ad dollars. (Source: “Snap shares fall nearly 9% after downgrade by Morgan Stanley, a rare rebuke by a firm that helped bring it public,” CNBC, July 11, 2017.)