6 ms·

Snapchat is a cautionary tale against leaving unicorns for dead

38 points by elsewhen 7y ago

xwdv 7y ago
I distinctly remember the moment that I had left Snapchat for dead once it’s share price dropped to 6 or so. I was considering buying several thousand shares at that time but when doing an analysis on the fundamentals I decided to pass. I could have easily doubled my money and maybe tripled if I had sold at the 52 week high. Oh well. There will be other unicorns.
- nprateem 7y ago
  Can I borrow your crystal ball that tells you where the lows and highs of a stock are please?
- icedchai 7y ago
  If you bought MSFT, AMD, and many other more stable tech companies around the same time as the SNAP IPO, you'd have more than doubled your money by now, too. Did you?
  - xwdv 7y ago
    Not at IPO but I did buy both at the beginning of the year. AMD currently has me at a 94.32% return but MSFT is only at 51.33%. Not bad for the year though.
mikece 7y ago
"[Snapchat] finally mastered Android..." What is so hard about making an Android app? Where they trying to make a go with some cross-platform toolkit that wasn't quite cutting it? "significantly increased its revenue-per-user..." THIS is the part on which I wish they would have elaborated. I'm guessing it's more than selling targeted ads or user info to data mining operations.
- ladon86 7y ago
  You have to support thousands of different devices, most of which are significantly lower spec than iOS devices. Also, the OS is usually running more concurrent processes than iOS, reducing the resources available to your app even more. If you’re doing something resource intensive like a continuously running camera preview with AR effects, these things are likely to cause you some headaches!
mantap 7y ago
A roulette wheel is not a sensible place to invest your money even if it does end up on black. Snapchat is a cautionary tale about investing in fads.
- AznHisoka 7y ago
  And it is still ~30% off its all time high shortly after its IPO years ago. Sure it has risen a lot from its lows, but that’s cherry picking dates.
  - baobabKoodaa 7y ago
    All stocks are below their all-time high almost all of the time. Compare to IPO price instead.
    - AznHisoka 7y ago
      It closed at around $24 at the IPO day... almost 50% off that price. Even worst that I thought
mcot2 7y ago
Terrible article. Yes it bounced back off of the lows but it’s still not close to profitable and well under the IPO price. Most of the employees got burned and have not recovered.
- onlyrealcuzzo 7y ago
  Well, it isn't news. It's PR.
  - jayparth 7y ago
    Link for those who haven't read: http://www.paulgraham.com/submarine.html http://www.paulgraham.com/submarine.html
- adventured 7y ago
  > Yes it bounced back off of the lows but it’s still not close to profitable and well under the IPO price. The primary concern is long-term survival and growth, not immediately getting to profitable. They have plenty of cash at $2.2 billion. Last three quarters of gross profit improvement: $116m -> $172m -> $223m Gross profit margin for those quarters: 36% -> 44% -> 50% Operating expenses for those quarters: $432m -> $477m -> $451m Meanwhile quarterly sales went from $320m to $446m. That's exactly what the market wants to see. Their path to ending the losses is extremely clear at this point.
  - ecf 7y ago
    Shouldn’t they have figured out all that BEFORE they went public? Call me naive, but I’m still of the opinion that a business shouldn’t be business if it can’t sustain itself.
    - adventured 7y ago
      Not necessarily, no. Biotech companies, as one example, frequently can't sustain themselves when they IPO. They IPO as a means to raise capital to pursue sustainability, to grow the business - develop product etc - using investor money. That's one of the reasons the public markets exist, to expose investors to potential upside. Tesla is very clearly a business and has lost money every year of its existence. Amazon lost money for its first seven years, including for several years following its IPO. Workday and ServiceNow have been money losing businesses for their entire histories. ServiceNow took 15 years to get to profitability in its most recent quarter. They ran losses in the pursuit of faster growth. Atlassian and Shopify have piled up annual losses for most (all?) of their histories. Would investors be better off without exposure to Shopify at a $3.x billion market cap at its IPO? It's now $36 billion. Investors get to ride their tremendous business growth (with some obvious risk), which is likely to result in eventual solid profitability.
rvz 7y ago
> It went public in early 2017 at $17 per share, sinking below $5 per share by the end of 2018. Well I guess those who threw their money into "dead stock" at an all time low of $5 at the time, all for it to rise back must have now made a significant gain for now. Snap is still not profitable just like Lyft, Uber, Blue Apron etc. But instead, this article is a cautionary tale of avoiding buying stocks of unprofitable companies at the IPO price.
dkrich 7y ago
Huh. I guess this is what passes as journalism in 2019.
kerng 7y ago
Not a very useful article... Take away: Don't invest in businesses that don't have a solid plan to make money. If you bought Microsoft stock in 2017 it doubled. If you bought Snap you lost half of it.
trimbo 7y ago
What a weird non-article. Anyone who is investing in Snapchat at this point is doing so purely on stock price speculation. There is no business reason to invest in this company.
jzl 7y ago
We all know their their stock has been doing well this year, but anecdotally (yes, I know, an extremely unreliable metric) it seems that there has been no rebound in usage or coolness factor. I don't hear anyone saying "I've been going back to Snapchat more", neither among personal acquaintances nor on social media or other public channels. Has anyone? Is their recent growth/rebound limited to any particular demographic or geographical area? Are they just quietly killing it? Are advertisers really being drawn back?
- markus92 7y ago
  From what I can see in my social circle, after they fixed that horrendous interface update, usage has gone up. This is compounded by people becoming more aware of their social media presence on Instagram. Stories is only part alternative. It's also very popular for group chats, for which Instagram has no alternative and WhatsApp doesn't have the perceived privacy that Snapchat has. Unfortunately I don't have any numbers to back this, just my perception.

38 points by elsewhen 7y ago

xwdv 7y ago

I distinctly remember the moment that I had left Snapchat for dead once it’s share price dropped to 6 or so. I was considering buying several thousand shares at that time but when doing an analysis on the fundamentals I decided to pass. I could have easily doubled my money and maybe tripled if I had sold at the 52 week high. Oh well. There will be other unicorns.

nprateem 7y ago
Can I borrow your crystal ball that tells you where the lows and highs of a stock are please?
icedchai 7y ago
If you bought MSFT, AMD, and many other more stable tech companies around the same time as the SNAP IPO, you'd have more than doubled your money by now, too. Did you?
- xwdv 7y ago
  Not at IPO but I did buy both at the beginning of the year. AMD currently has me at a 94.32% return but MSFT is only at 51.33%. Not bad for the year though.

mikece 7y ago

"[Snapchat] finally mastered Android..." What is so hard about making an Android app? Where they trying to make a go with some cross-platform toolkit that wasn't quite cutting it? "significantly increased its revenue-per-user..." THIS is the part on which I wish they would have elaborated. I'm guessing it's more than selling targeted ads or user info to data mining operations.

ladon86 7y ago
You have to support thousands of different devices, most of which are significantly lower spec than iOS devices. Also, the OS is usually running more concurrent processes than iOS, reducing the resources available to your app even more. If you’re doing something resource intensive like a continuously running camera preview with AR effects, these things are likely to cause you some headaches!

mantap 7y ago

A roulette wheel is not a sensible place to invest your money even if it does end up on black. Snapchat is a cautionary tale about investing in fads.

AznHisoka 7y ago
And it is still ~30% off its all time high shortly after its IPO years ago. Sure it has risen a lot from its lows, but that’s cherry picking dates.
- baobabKoodaa 7y ago
  All stocks are below their all-time high almost all of the time. Compare to IPO price instead.
  - AznHisoka 7y ago
    It closed at around $24 at the IPO day... almost 50% off that price. Even worst that I thought

mcot2 7y ago

Terrible article. Yes it bounced back off of the lows but it’s still not close to profitable and well under the IPO price. Most of the employees got burned and have not recovered.

onlyrealcuzzo 7y ago
Well, it isn't news. It's PR.
- jayparth 7y ago
  Link for those who haven't read: http://www.paulgraham.com/submarine.html http://www.paulgraham.com/submarine.html
adventured 7y ago
> Yes it bounced back off of the lows but it’s still not close to profitable and well under the IPO price. The primary concern is long-term survival and growth, not immediately getting to profitable. They have plenty of cash at $2.2 billion. Last three quarters of gross profit improvement: $116m -> $172m -> $223m Gross profit margin for those quarters: 36% -> 44% -> 50% Operating expenses for those quarters: $432m -> $477m -> $451m Meanwhile quarterly sales went from $320m to $446m. That's exactly what the market wants to see. Their path to ending the losses is extremely clear at this point.
- ecf 7y ago
  Shouldn’t they have figured out all that BEFORE they went public? Call me naive, but I’m still of the opinion that a business shouldn’t be business if it can’t sustain itself.
  - adventured 7y ago
    Not necessarily, no. Biotech companies, as one example, frequently can't sustain themselves when they IPO. They IPO as a means to raise capital to pursue sustainability, to grow the business - develop product etc - using investor money. That's one of the reasons the public markets exist, to expose investors to potential upside. Tesla is very clearly a business and has lost money every year of its existence. Amazon lost money for its first seven years, including for several years following its IPO. Workday and ServiceNow have been money losing businesses for their entire histories. ServiceNow took 15 years to get to profitability in its most recent quarter. They ran losses in the pursuit of faster growth. Atlassian and Shopify have piled up annual losses for most (all?) of their histories. Would investors be better off without exposure to Shopify at a $3.x billion market cap at its IPO? It's now $36 billion. Investors get to ride their tremendous business growth (with some obvious risk), which is likely to result in eventual solid profitability.

rvz 7y ago

> It went public in early 2017 at $17 per share, sinking below $5 per share by the end of 2018. Well I guess those who threw their money into "dead stock" at an all time low of $5 at the time, all for it to rise back must have now made a significant gain for now. Snap is still not profitable just like Lyft, Uber, Blue Apron etc. But instead, this article is a cautionary tale of avoiding buying stocks of unprofitable companies at the IPO price.

dkrich 7y ago

Huh. I guess this is what passes as journalism in 2019.

kerng 7y ago

Not a very useful article... Take away: Don't invest in businesses that don't have a solid plan to make money. If you bought Microsoft stock in 2017 it doubled. If you bought Snap you lost half of it.

trimbo 7y ago

What a weird non-article. Anyone who is investing in Snapchat at this point is doing so purely on stock price speculation. There is no business reason to invest in this company.

jzl 7y ago

We all know their their stock has been doing well this year, but anecdotally (yes, I know, an extremely unreliable metric) it seems that there has been no rebound in usage or coolness factor. I don't hear anyone saying "I've been going back to Snapchat more", neither among personal acquaintances nor on social media or other public channels. Has anyone? Is their recent growth/rebound limited to any particular demographic or geographical area? Are they just quietly killing it? Are advertisers really being drawn back?

markus92 7y ago
From what I can see in my social circle, after they fixed that horrendous interface update, usage has gone up. This is compounded by people becoming more aware of their social media presence on Instagram. Stories is only part alternative. It's also very popular for group chats, for which Instagram has no alternative and WhatsApp doesn't have the perceived privacy that Snapchat has. Unfortunately I don't have any numbers to back this, just my perception.