Once Facebook spearheaded the social media movement at the beginning of the century, companies like Snapchat (SNAP) quickly sprouted up to fill the value voids left by the behemoth.
Released in 2011, Snapchat made its debut on the New York Stock Exchange in March 2017. Since its initial public offering at $17, the company’s market capitalization has fallen to $14.3B, or just over $11 per share.
Snapchat at a glance
Although most people forget the company’s original name “Picaboo,” Snapchat created a user experience through “Snaps,” which consist of either photos or short videos. Unique to Snapchat, the videos, photos, and messages disappear after being viewed. The company provided value to users who wanted a way to have more casual and simplified interactions than applications like Facebook, Instagram, or various messenger apps.
Snapchat has gone through some interesting changes and events over the years:
- Video sharing functionality was added in late December 2012.
- A security flaw led to the hacking of 4.6 million users’ names and phone numbers in 2013-2014.
- Snapchat turned down an offer from Facebook in late 2013.
- In 2016, the company rebranded itself Snap, Inc.
History of Snapchat
If you had invested at the IPO price of $17, your investment would have quickly shot up as high as $29.44.
However, since that time, share prices have fallen more than 60% from the highs, and more than 35% from the IPO price of $17. You’d be left with about $0.65 for every dollar you initially invested.
Snap of SNAP
Source: NYSE: SNAP
Why purchase Snapchat stock?
Pros of purchasing Snapchat stock:
- The company lacks similar competition
- Growth on a rolling 12-month basis stands at 44.36%, with 100% growth from 2016 to 2017
- Snapchat maintains a strong position of assets to cover its current negative cash flows
Cons of purchasing Snapchat stock:
- Despite record growth, the company burns almost $1 billion a year in cash as it grows.
- Although Facebook proved that the monetization of social media is possible, Snapchat still faces skepticism from many potential advertisers.
- Snapchat currently relies heavily on advertising dollars, which make up over 95% of its revenue.
How to purchase SNAP
Most major brokerage firms that trade securities will provide you with the ability to purchase Snapchat’s stock. Some basic ideas on how to acquire the stock:
- Decide how much you’d like to invest. If you’re an investor, you expect your capital will increase in value, given enough time, with the full knowledge that it’s possible to lose capital as well. Research and determine the risks associated with Snapchat and your own risk tolerance before you decide on an appropriate investment amount.
- Find a suitable broker. If you’re unsure of the specific steps to purchase a stock, most brokerages will lend support, along with educational videos to demonstrate how to purchase SNAP stock.
- Purchase SNAP. Once you’re set on a broker, follow the instructions to enter a purchase order for the number of shares you wish to purchase. You can find out more about the types of orders here.
For more information about buying stock, check out Benzinga’s Best Online Brokerage. Don’t have time? We’ve got you. Here’s a quick look at our picks.
- Best overall: Ally Invest, TD Ameritrade, E-Trade, Charles Schwab, Fidelity
- Best for low-cost: Ally Invest
- Best for day trading: Interactive Brokers
As is often the case with newly listed companies, Snapchat still remains a risky investment in the eyes of most analysts. The company currently grows at an exceptional rate, but has yet to temper its costs with growth.
If the company turns profitable like Facebook, the current share prices are a bargain. Time will ultimately tell whether Snapchat lives up to expectations.
Snapchat’s price reflects what investors expect of the company. In order to justify the current share price, many individuals expect Snapchat to turn a profit at some point.
What you have to decide for yourself is if that’s true and when its value increase will be realized.