The valuation range is apparently targeting between $20 billion got $25 billion. Given how other hot IPOs have gone, I wouldn’t be surprised to see it trade through that valuation, assuming the markets are still trading well come that time.
Still, the actual valuation is perplexing to me. I previously laid out my case when the company introduced its Spectacle Glasses less than a week ago.
Essentially, the company seems overvalued and here’s why. If the company has a lights-out year in 2017, we’re talking about $1 billion in sales. Taking the low end of the range – $20 billion – we’re pricing Snapchat at 20x sales.
Even with strong margins and assuming the company is profitable, this is more expensive than the industry-leading Facebook . I know Snap is the hot name with the hot growth, but choosing between the two, Facebook is definitely more attractive.
Unless Snap shows us strong margins and earnings – or the potential for earnings – alongside continued strong growth both for users and revenues, this one is definitely overvalued.
