SnapChat is crashing? I NEVER SAW THIS COMING!!!

So I’ve already written on Snapchat a couple of times now because very frankly, giving a $30B valuation to what is essentially a profitless app is absolutely asinine. When the top argument of your prospectus is how you can use “lenses” to promote movies, you know your business shouldn’t have passed the $1B market cap. But perhaps what shocked me even more is that people really were willing to pay $30B for this piece of junk.

Anyway, this is far from the first time I’ve written on Snapchat. See my previous posts on the topic:

https://www.fscomeau.com/snapchat/

https://www.fscomeau.com/snapchat-worst-company-times/

https://www.fscomeau.com/snapchat-all-time-high-ipo/

https://www.fscomeau.com/bye-bye-snapchat/

Anyway, perhaps I shouldn’t write on Snapchat again so early, but I couldn’t resist. Of course, since writing those, Snapchat has plummetted:

There are so many problems with this company that it’s almost not worth discussing them. Seriously, this company is so bad I can’t believe anyone who took five minutes to read the prospectus invested in it. I mean, they didn’t even try to hide what was wrong in the prospectus. Next time, just print “WARNING: WE ARE NOT PROFITABLE AND WILL NEVER BE” over and over, on every page of the prospectus and I guess people will still “invest” (term used loosely here) in it.

The same moron who bought Snapchat at $20+ (LOL) are probably holding today, thinking it has to bounce back. To be honest, I think they are kinda right. This one should bounce eventually, if only to lure more suckers in. With that in mind, with lockups periods about to end (i.e. one of the rare things CNBC got right), I’d expect any insider with a brain to slowly liquidate their position, meaning this stock cannot go up.

Listen people: this company isn’t worth $30B. Hell, it’s not even worth $10B. I wouldn’t even invest if it was valued at $5B. I have no doubt the app is excellent (then again, I don’t know), but the company is garbage. It lost $500M in 2016 and only had $400M in revenue. I mean, even their freaking “cost of revenue” is higher than their “revenue” ffs:

What else do you want me to say? They have to spend $1.15 to get $1 in revenue. Imagine you had a lemonade stand and had to spend $1.15 in lemons for a $1 lemonade, where do you think your business is going. That’s not counting research and development, administrative fees, sales and marketing, etc. “But but but eventually people will like our lemonade so much we’ll be able to increase the price to $2 blah blah blah.” Yeah, right.

The social media market is getting oversaturated. Twitter itself is in the ropes (another IPO horror story – down from $70 to $18, but SnapChat is different, right?) and at least TWTR only asked for a $14.2 IPO valuation (still LOL). It’s okay to invest in a growth company and it’s okay to invest in a company that is losing money, but at least invest in a growth company that has something going on.¬†And invest at a good price. Invest in AMD. Invest in TSLA if you absolutely must. But skip that garbage Snapchat. I wouldn’t be surprised to see it taken out at $4-5 per share (again, check my old articles).

Snapchat is a fad at best, and even if it isn’t, it will never be profitable. See: APRN for another of these worthless companies (another big lol).

To all Snapchat shareholders: sell immediately. Or wait a small bounce, if you absolutely must. You may or may not get it. This one is going single digits by the end of the year. You’re not going to make your money back. Not on this share, at least. Snapchat is worth $3-4 per share perhaps.

 

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