The Snapchat stock has had mixed reactions since listed in the stock market. Investors are willing to break the bank for shares from Facebook and Twitter. But they might have to rethink and weigh their options when it comes to Snapchat. To answer the question as to why investors react this way, let us take a brief look at the company, Snapchat.
Snapchat is a group messaging app with over 150 million users globally. The camera company as they fondly known began operation since 2011. And as a matter of fact, their 150 million users are said to consume over 800 hours of video every second.
An Investment in Snapchat Stock: Good or Bad?
The public market is tough. And Snap management had to struggle to gain entrance. They face serious competition from social media heavyweights like Twitter and Facebook. And these companies have more active users and better growth potentials.
The SNAP stock performed poorly in the fiscal year of 2016 losing a whopping $514 million and thus generating revenue of $404. And advertising was responsible for at least 96% of the revenue generated. No one is frowning at advertising generating revenue for them. Even Facebook and Alphabet Inc are basically in the same boat too.
One of the reasons investors shy away from SNAP is that it is not a protected technology. The SNAP stock lacks the potential of securing more advertising deals which depends on the working relationship shared with the ad buyers and performance of the ads. Snap cannot boast of having the kind of data or history that platforms like Facebook have. FB is so different from SNAP because the company knows the ROI their ads will have and have developed a solid working relationship with ad buyers.
Adding to the above speculation on why the SNAP stock isn’t a good option is that the company has started burning cash faster than it should.
It is not ideal to invest in the SNAP stock for now unless you do not mind testing deeper waters. Besides their poor financial performance, growth in daily active users is declining. And we could be witnessing a negative growth unless the company takes drastic action.