February 6th 2017

Never Take My Stock Advice- on Snap or Anyone Else

I would advise that no one ever takes stock advice from me. Period. I can't handle that responsibility.

That said...

I'm looking at the impending Snapchat IPO (they're actually called Snap), and I'm seeing some encouraging parallels between it and Facebook around the time of the $FB IPO.

Facebook, if you remember, IPOed at $32/share or so and quickly dropped to $20/share- where I bought in. The reason I bought, though, had less to do with the price and more to do with the people, culture, and leadership. I remember telling my wife that they're the best engineers in the world, and even if Facebook-the-social-network failed, they can own whatever space they want.

I've felt the same way about Snap for a while now. Not at first, but especially recently.

I wouldn't write an article on just that parallel, though.


The reason Snap's IPO reminds me of Facebook's is that Snap's numbers are not looking good right now, especially to Wall Street types.

Their user growth has flatlined, and although their revenue is skyrocketing year over year, so are their losses. On top of that, financial analysts are going to instantly put Snap in a category with Facebook and notice people spend half as much time on Snapchat as they do on Facebook each day.

👆 That is why Snap is an opportunity.

When Facebook was first on the market, analysts noted that a small percentage of their revenue came from mobile, yet online advertising as a whole was seeing huge growth in mobile and declines in desktop. They concluded that Facebook wouldn't be able to make the shift to mobile fast enough to stay relevant.

I correctly realized that if people were going to mobile, Facebook would go there, too, and they'd do it well. Currently, their stock is around $130/share and climbing, and as you well know, they're crushing mobile.


My prediction is that when Snap IPOs, analysts and others will look at their userbase and monies, they'll compare them to Facebook, and they'll write them off.

As a company, however, Snap is one of the most innovative we've seen in recent years. Not only did they create a new paradigm of social network and a new category of content, they just launched a hardware product using the techniques and values they used to launch their social network- a mix of discovery/exclusiveness and fashion/trends.


It's not a guarantee, so please draw your own conclusions, but after Snap IPOs and the analysts get cold feet, I'm definitely going to swoop in and pick some up at the bottom. Long term, the Snapchat app might only be a small piece of their huge success, but I feel strongly that they'll have huge success in whatever they do.

Big up, Evan.