one of the biggest IPOs of the year
snapped the Parenthood snapchat had a
very rough go of it since going public
at several months ago they reported
their second quarter of earnings this
week again more disappointment more
reduction of estimates from analysts
more clobbering of the stock price which
has now been almost cut in half since
its peak right after the IPO what is
next where do we go from here
fortunately the jury really is still out
on whether snapchat is going to stumble
and fail and become what Twitter is
unfortunately become where there was
tremendous excitement and optimism when
the company went public the results have
simply not delivered on that and the
stock is hanging around multi-year lows
for Twitter is this going to happen to
snapchat or will snapchat pick itself up
like Facebook did after its IPO and you
go back to Facebook remember that even
Facebook after the IPO got cut in half
from the stock price of the IPO and then
came roaring back from there is that
what will happen to snapchat and jury is
still out what we do know is that
snapchat ultimately like all stocks will
trade at something on the order of 15 to
25 times earnings valuation matters here
and one of the good news for the
snapchat Bulls is that the company is
now much less expensive than it was when
it went public
so snapchat actually has to not be as
big as it needed to be when it was in
the mid 20s to justify its valuation now
it has about a 15 billion dollar
valuation before and at about a thirty
billion dollar valuation so less
performance needed over the long haul
but the key drivers for snapchat over
the next several quarters will be user
growth can they continue to grow users
and engagement per user within the US
and Europe their core markets and can
they continue to grow revenue and if
either of those stall and both of them
are growing at rates that are
disappointment relative to expectations
prior to the IPO if either of those
stall your downside scenario really is
where Twitter is gone which is about
four times current year revenue right
now Snap is shaving at about 15 times
current year revenue presumably they
will grow their revenue solidly over the
next year or two but even if they dub
each year they're still trading at four
times two years out revenue so things
have to go very well but if they do a
lot of Wall Street analysts came out
this week and pointed out that if things
do go well there is still plenty of
upside in fact more than there was back
at the IPO so bottom line is jury's
still out on snap but not in an
encouraging quarter the optimists say
hey finally all the bad news in the
stock estimates are low enough that we
can beat going forward we will see
[Music]