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Not really a fair direct comparison to FB. Snap's revenues grew 600% from 2015 to 2016 (versus FB's 54% growth), you have to account for growth rate as well. Sn

Not really a fair direct comparison to FB. Snap's revenues grew 600% from 2015 to 2016 (versus FB's 54% growth), you have to account for growth rate as well. Snap is estimated to be at $2B in 2018 (by Goldman)[1]. So yes, still overvalued, but not nearly as bad as an implied $5B valuation. [1]http://www.businessinsider.com/goldman-sachs-is-predicting-snap-will-deliver-2-billion-in-revenue-in-2018-2017-2 http://www.businessinsider.com/goldman-sachs-is-predicting-s...

MegaButts 10y ago
They also increased their losses from 2015 to 2016, and their growth is slowing substantially as Instagram is competing more aggressively with them.
JumpCrisscross 10y ago
> Not really a fair direct comparison to FB Fair enough. The standard growth adjustment to the P/E ratio is the price/earnings to growth (PEG) ratio. Let's consider a price/revenue to growth (PRG) ratio for Facebook and Snap. Facebook's $398bn valuation [1] sits on $27.6bn of 2016 revenues, up 54.2% from 2015 [2]. This represents a PRG of 0.266. Snap's $30.4bn valuation [3] rests on $404 million of 2016 revenues, up 690% from 2015 [4]. Thus, a PRG of 0.109. Snap needs to grow revenues by at least 290% a year every year for the foreseeable future to reach Facebook's price/revenue levels. Put another way, Snap has a year and a half [5] to hit $2bn in revenues. (At that point, its price-today-to-revenues-tomorrow profile will be similar to Facebook's price-today-to-revenues-today.) [1] https://www.google.com/finance?q=NASDAQ%3AFB&ei=z_C9WLngO4W8e8iYvsAM https://www.google.com/finance?q=NASDAQ%3AFB&ei=z_C9WLngO4W8... [2] https://www.google.com/finance?q=NASDAQ%3AFB&fstype=ii&ei=JPG9WOGJHISOequNiJgM https://www.google.com/finance?q=NASDAQ%3AFB&fstype=ii&ei=JP...} [3] https://www.google.com/finance?q=NYSE%3ASNAP&sq=snap&sp=2&ei=1PG9WMniAYPEePvMsJgL https://www.google.com/finance?q=NYSE%3ASNAP&sq=snap&sp=2&ei... [4] https://www.google.com/finance?q=NYSE%3ASNAP&fstype=ii&ei=1vG9WKmEFsu_e7XugZgK https://www.google.com/finance?q=NYSE%3ASNAP&fstype=ii&ei=1v... [5] log 1.29 ((27.64 / 398.3) * 30.44) / 0.4045) Disclaimer: this is not investment advice. Please don't be a numpty and buy or sell securities based on Internet comments.
- adventured 10y ago
  > Snap needs to grow revenues by at least 290% a year every year for the foreseeable future No they don't, you're exaggerating substantially. They'll hit near $1 billion in sales for fiscal 2017. FB's price to sales number as you noted is 14. For Snapchat to hit that level, they need around $2 billion in sales as of today (that'll soon be even lower I suspect). They'll need one year of 100% growth after this year. They could easily get near or hit the 14 sales multiple by the end of 2018 in other words, without needing a single year of 290% growth in either 2017 or 2018. Your speculation missed by a mile. They did $404 million for 2016. 290% growth on that would get them near $1.56 billion. In just five to six quarters of your growth projection, they'd have caught up to the Facebook sales multiple. Or be conservative about it. They need: 100% growth for 2017 = ~$800m in sales for the year 70% growth for 2018 = ~$1.35b in sales for the year. They'd have a 21 sales multiple there (50% higher multiple, with near 50% faster growth). 50% growth for 2019 = ~$2 billion in sales, which gives them the 14 price to sales multiple on today's market valuation. Based on what kind of sales growth rates have been achieved by the likes of Twitter, these growth numbers are reasonable. Not even remotely close to requiring 290% per year growth for years into the foreseeable future.
  - JumpCrisscross 10y ago
    > In just five to six quarters of your growth projection, they'd have caught up to the Facebook sales multiple. >> Put another way, Snap has a year and a half to hit $2bn in revenues "Five to six quarters" is the same as a year and a half. > 50% growth for 2019 = ~$2 billion in sales, which gives them the 14 price to sales multiple on today's market valuation In 2019. We are comparing Snap's price-to-revenue ratio, adjusted for expected growth, with Facebook's. If you increase the time Snap has to reach a price-to-revenue threshold then you've reduced its growth. That, in turn, requires a higher price-to-revenue ratio to make the growth-adjusted PRG comparable. Going from $404 million to $2.06 billion in 3 years (instead of 2 or 1.5) means a 70.4% growth rate (instead of 122% or 190%) [1]. That produces PRG ratios of 1.07, 0.627 and 0.399, respectively. Higher than Facebook's 0.266. [1] http://www.investopedia.com/terms/c/cagr.asp http://www.investopedia.com/terms/c/cagr.asp
kordless 10y ago
Agree. There will never exist a direct comparison, given this current market is about one company owning a particular niche in the overall online services market. There are no close 2nd placers when it comes to a particular model and offering.
jetru 10y ago
Well, there has to be a little offset to compensate for the size. It's easier to grow a smaller business at high rates than it is at Facebook scale.

MegaButts 10y ago

They also increased their losses from 2015 to 2016, and their growth is slowing substantially as Instagram is competing more aggressively with them.

JumpCrisscross 10y ago

> Not really a fair direct comparison to FB Fair enough. The standard growth adjustment to the P/E ratio is the price/earnings to growth (PEG) ratio. Let's consider a price/revenue to growth (PRG) ratio for Facebook and Snap. Facebook's $398bn valuation [1] sits on $27.6bn of 2016 revenues, up 54.2% from 2015 [2]. This represents a PRG of 0.266. Snap's $30.4bn valuation [3] rests on $404 million of 2016 revenues, up 690% from 2015 [4]. Thus, a PRG of 0.109. Snap needs to grow revenues by at least 290% a year every year for the foreseeable future to reach Facebook's price/revenue levels. Put another way, Snap has a year and a half [5] to hit $2bn in revenues. (At that point, its price-today-to-revenues-tomorrow profile will be similar to Facebook's price-today-to-revenues-today.) [1] https://www.google.com/finance?q=NASDAQ%3AFB&ei=z_C9WLngO4W8e8iYvsAM https://www.google.com/finance?q=NASDAQ%3AFB&ei=z_C9WLngO4W8... [2] https://www.google.com/finance?q=NASDAQ%3AFB&fstype=ii&ei=JPG9WOGJHISOequNiJgM https://www.google.com/finance?q=NASDAQ%3AFB&fstype=ii&ei=JP...} [3] https://www.google.com/finance?q=NYSE%3ASNAP&sq=snap&sp=2&ei=1PG9WMniAYPEePvMsJgL https://www.google.com/finance?q=NYSE%3ASNAP&sq=snap&sp=2&ei... [4] https://www.google.com/finance?q=NYSE%3ASNAP&fstype=ii&ei=1vG9WKmEFsu_e7XugZgK https://www.google.com/finance?q=NYSE%3ASNAP&fstype=ii&ei=1v... [5] log 1.29 ((27.64 / 398.3) * 30.44) / 0.4045) Disclaimer: this is not investment advice. Please don't be a numpty and buy or sell securities based on Internet comments.

adventured 10y ago
> Snap needs to grow revenues by at least 290% a year every year for the foreseeable future No they don't, you're exaggerating substantially. They'll hit near $1 billion in sales for fiscal 2017. FB's price to sales number as you noted is 14. For Snapchat to hit that level, they need around $2 billion in sales as of today (that'll soon be even lower I suspect). They'll need one year of 100% growth after this year. They could easily get near or hit the 14 sales multiple by the end of 2018 in other words, without needing a single year of 290% growth in either 2017 or 2018. Your speculation missed by a mile. They did $404 million for 2016. 290% growth on that would get them near $1.56 billion. In just five to six quarters of your growth projection, they'd have caught up to the Facebook sales multiple. Or be conservative about it. They need: 100% growth for 2017 = ~$800m in sales for the year 70% growth for 2018 = ~$1.35b in sales for the year. They'd have a 21 sales multiple there (50% higher multiple, with near 50% faster growth). 50% growth for 2019 = ~$2 billion in sales, which gives them the 14 price to sales multiple on today's market valuation. Based on what kind of sales growth rates have been achieved by the likes of Twitter, these growth numbers are reasonable. Not even remotely close to requiring 290% per year growth for years into the foreseeable future.
- JumpCrisscross 10y ago
  > In just five to six quarters of your growth projection, they'd have caught up to the Facebook sales multiple. >> Put another way, Snap has a year and a half to hit $2bn in revenues "Five to six quarters" is the same as a year and a half. > 50% growth for 2019 = ~$2 billion in sales, which gives them the 14 price to sales multiple on today's market valuation In 2019. We are comparing Snap's price-to-revenue ratio, adjusted for expected growth, with Facebook's. If you increase the time Snap has to reach a price-to-revenue threshold then you've reduced its growth. That, in turn, requires a higher price-to-revenue ratio to make the growth-adjusted PRG comparable. Going from $404 million to $2.06 billion in 3 years (instead of 2 or 1.5) means a 70.4% growth rate (instead of 122% or 190%) [1]. That produces PRG ratios of 1.07, 0.627 and 0.399, respectively. Higher than Facebook's 0.266. [1] http://www.investopedia.com/terms/c/cagr.asp http://www.investopedia.com/terms/c/cagr.asp

kordless 10y ago

Agree. There will never exist a direct comparison, given this current market is about one company owning a particular niche in the overall online services market. There are no close 2nd placers when it comes to a particular model and offering.

jetru 10y ago

Well, there has to be a little offset to compensate for the size. It's easier to grow a smaller business at high rates than it is at Facebook scale.