How Low Will Snapchat Go After The IPO?

How low will snapchat go?How low will Snapchat go after the IPO?  We all know that the big Snapchat IPO is suppose to rival that of Facebook, but will it be more like Twitter instead?  Snapchat is trading at about $17 a share to start it’s run on Wall Street.  With the market going through the roof right now and being at an all time high, the sky seems to be the limit for Snapchat or is it?




To look at the two different roads that Snapchat will most likely take, all you have to do is look at Facebook and Twitter.  Is Snapchat going to go through the roof and never look back or is it going to crumble to unforeseen lows.  One thing is for sure, no company will increase its stock price too long without making a good profit.  And this is why I believe that you will want to tread lightly before jumping on this one.

Let’s take a look at what could happen if Snapchat follows the path that Twitter has traveled down.  When Twitter went live on November 7th 2013, it was offered at $26 a share and closed at $45 a share for a gain of 73%.  Now that seems like a great deal for all involved, except if you held on to it until today.  It is now trading at about $15 a share, or a little over 30% of what it closed at that day.  Since it went live, it is down 62% and that is not something to write home about.

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Now there is always the other path that Snapchat could take, the road of Facebook.  When Facebook was offered, it went for $38 a share.  It was lucky to close at barely above that price.  It took a ton of buybacks from the brokerage houses and an early game glitch for it to close at $38.23.  After that, it took a big dive and dropped dramatically over the next few months.  I have written about that, which can read about here.  (Quite the story if you don’t know all of it)  We now know that Facebook is growing fast and only looking to get stronger as the months turn into years.  Since its opening back in 2011, Facebook is now up about 260%.  I would take that kind of return any day of the week.  But when it comes to figuring out how high or low Snapchat will go after the IPO, we will need to do a bit more research.

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Now back to Snapchat and what road it will most likely go down.  After opening at $17 a share, it will face some huge volatility over the next few months.  I don’t see it becoming the next Facebook due to multiple reasons.  One, it doesn’t make the kind of money that Facebook makes.  The user base of Facebook at IPO launch was over 400 million users, where Snapchat has about 150 million users.  The other problem I see with the user base is that they are all mostly young people.  Not that is a problem to be young, but those older people in their 30’s and up have the most money.  The real money for Snapchat will come from advertisers and they are looking to sell to those that have the money.  This will work against Snapchat in the near future and you will see the stock price get punished.  I am not saying that you will have a huge drop in price quickly, but I think you can look at Twitter’s chart and see the future for Snapchat.  I think we are getting the idea of how low will Snapchat go after the IPO and that is not just a few percentage points lower.




I have many people ask me about Snapchat and how to trade it.  I would personally sit back and watch the fireworks for the first few weeks and then short it.  I believe there are many greedy people out there that are not thinking correctly about this company and they are hoping that it is the next Facebook.  They are about to be bitterly disappointed and their wallets and purses will be lighter because of it.  I see it dropping 40% in the next 5 years from its opening IPO price.  It will have help from the brokerage houses to keep it above the $17 mark for a few days, but when proper market mechanics start to take over, you will see a nice drop.  Fundamentally, this company is not worth the billions it is claiming to be worth. When wondering how low will Snapchat go after the IPO, I think all you need to do to answer this is to look at Twitter’s history.

 

How Low Will Snapchat Go After The IPO?

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