Wall Street analyst gives Snapchat a sell rating
The much anticipated and hyped IPO of Snapchat is well underway. The biggest tech IPO since Facebook in 2012, Snapchat’s debut as a pubic company saw its shares surge by 44% in the first week of trading. From $17 per share to a price of $24.48 per share.
Institutional Buyers?
The Snapchat IPO prospectus shows that one-third of the shares on offer were sold to institutional investors through a syndicate led by Morgan Stanley, Goldman Sachs, and JP Morgan, and at the flotation price of $17 on condition of a medium-term pledge not to sell the shares for at least one year.
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SnapChat Now A Sell?
But despite the market euphoria and media hype, Brian Wiser of Pivotal Research Group, the first Wall Street expert to issue a rating on Snapchat stock, declared the shares a sell. Based on his 2017 end of year financial projections, the expert valued the stock’s real worth as only $10 a share. He noted the firm’s formidable social media competitors – principally Instagram and its parent company, the social media behemoth, Facebook – the reason for his caution.
In an effort to differentiate itself from those other tech giants, Snap Inc actually filed for its IPO under the title of a camera company. It did not refer to a messaging service – which could be a smart move. But looking at the hard data of user numbers, it was just six months ago that Facebook launched a new feature – Instagram Stories. This feature competes directly with Snapchat. In that short period, it has already accumulated nearly the same number of users.
Share Price Future Uncertain
Although the company certainly has huge potential to generate revenue through advertising, both Facebook and Google (Alphabet) are already way ahead in this respect. They have established huge user bases which can compete with, and overtake, any of Snapchat’s innovations. So, despite the excitement and hyperbole surrounding the floatation, the future for the share price is uncertain.
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