Without a doubt, the upcoming Snapchat IPO is one of the most awaited tech IPOs in recent times. The Snap Inc IPO has attracted a lot of attention from investors and analysts alike. According to recent reports, Snap Inc will now look to go public at a valuation of $19 billion to $22 billion, as it goes public under the ticker symbol SNAP on the New York Stock Exchange. And Snap Interactive's relatively paltry $50 million market cap may have something to do with it. Be that as it may, Snapchat's reported initial valuation target of $25 billion was way too ambitious, and there's no lack of consensus on that front. However, even the scaled down $19 billion target may not be attractive enough.
What you get if you buy into the Snapchat IPO?
Snapchat is expected to generate $1 billion in revenue in 2017. And even Snap Inc's 1 year forward P/S ratio of 19 to 22, is expensive, even by tech unicorn standards. Especially for a company that has massive-and-mounting losses to contend with. For 2016, Snap Inc recorded a net loss of $514 million, much higher than its revenue of $404 million for the year. Further, as many reports have suggested, Snapchat's user growth has fallen sharply after Instagram Stories made its debut on the photo sharing app. Snapchat's slowing user growth is another big concern, with the sequential growth rate in Q4 falling to as low as 3.3% from as high as 17% earlier in the year. One can't help but draw parallels between Snapchat and Twitter, on multiple counts, one of which is the rapid slowdown in user growth. That said, even Twitter was relatively much better placed in terms of free cash flows during its IPO, with a -10% FCF margin, compared to Snap Inc's -113%.
Submitted February 17, 2017 at 06:47AM by gambit270 http://ift.tt/2kQD4SU
