Twitter/snapchat are media companies in competition with prime time television and daily soaps. It's okay, IMO, if justification for their valuation consists of mushy statements about user feelings. It's their business.
I'd rather own snapchat personally. Think it has more upside than the rest of those combined. Only one close is twitter. You don't buy a company like snapchat for a 20% return, it's 5-10x return or bust.
Well, SNAP is currently trading for $15 billion. If they can get $20 to $22.5 billion for the company right now in an acquisition by eg Google, they should immediately take it.
Twitter is the picture of where they're going, best case scenario (the difference in risk of course being, Instagram isn't a serious threat to Twitter's existence). Twitter has four times the sales (annualized run-rate), more cash, a lower quarterly burn rate (now), with 23% less market cap.
Given what is happening with Twitter I wonder if people will become more skeptical of these valuations. It is not that Twitter or Snapchat is a bad business. It just isn't that valuable.
It's not that hard to picture Snap raising billions in the stock market: the company got $2.7bn at the $3.6bn IPO last year. Twitter raised $1.8bn in 2013. Their problem is not lack of financing.
I have yet to speak with anyone who thinks Snapchat's valuation is realistic and that their business model will sustain them. When I see this I just think of Twitter all over again.
I would love to hear arguments supporting Snapchat though.
Snap and Twitter both have valuation much higher than $3 billion and have zero profit. I would agree that the valuation seems high, but not compared to other tech companies.
Snapchat is worth 3-4 billion because someone offered to buy them or invest for a percentage that valued them at that price.
People arguing whether or not it is worth that price are silly. It's like arguing whether a house is worth the asking price. It is if there is a buyer who values it at that price.
Snapchat reportedly has minimal revenue, and is already discovering that advertisers aren't going to pony up $100 CPMs[1].
When Facebook went public, it was already generating more than a billion dollars in revenue a quarter. When Twitter went public, it was generating well over $100 million a quarter.
There is no doubt that Snapchat is an important platform and can generate revenue - perhaps significant amounts of it - but it has a long way to go before it can justify a public market valuation anywhere near its current private market valuation.
For comparison, Twitter is currently worth about $23 billion and generated more than $400 million in revenue last quarter.
Snapchat, in its current state, might be an interesting public market investment at a few billion. Above that, there are much better risk-reward opportunities.
I'm betting either Snap or Twitter will be acquired, once their price is low enough (maybe soon). They aren't just going to fizzle out as they both have substantial number of users. I don't own either, but my guess is that their stock will see a big bump similar to the outcome of LinkedIn's acquisition by Microsoft. This is just a war of attrition.
The question is if that middle ground can support the $20bn SNAP valuation.
I would put my money on no. Snap seems like a worse version of Twitter IMO. Less value from a financial and social sense that was ridiculously overvalued at the IPO.
Twitter's valued at only $10 Billion. Snapchat just raised at rumored $18 Billion valuation.
reply