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posted on 15 March 2017

IP Oh: Snap's Filing Reveals Problems


-- this post authored by Martin Armstrong

Snap, the company behind Snapchat, released their IPO filing earlier this year and the IPO was released on 02 March (NASDAQ:SNAP).

There's an awful lot to digest within its 200+ pages, including some seriously worrying signs for potential investors. In the last two years, Snap's costs have outstripped revenue on an alarming scale. The company cites vastly increased payments to third-party infrastructure partners for hosting as the main reason for not capitalizing on the otherwise positive growth in users and revenue. Last year Snap lost $515m on $404m of revenue.

This chart shows the revenue and cost of revenue of Snap Inc. in 2015 and 2016.

Infographic: IP Oh: Snap's Filing Reveals Problems | Statista You will find more statistics at Statista.

The stock, after moving well above the IPO offering of $17, has not done well, declining almost 30% from the early post-IPO surge (but still about 18% above IPO offer). But everyone who bought SNAP in the secondary market the first three days of trading and held the stock has been under water two weeks hence, continuously since the fourth day. Perhaps investors have decided the terrible cash flow may be something to worry about. The volume of stock purchased above $23 presents a formidable resistance for advancement above prices between $23 and $27. As our friends at Online Trading Academy would say, that area is a potent supply zone for SNAP.


Note: This article has been updated and augmented by Econintersect.

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