SNAP – Is it Going to Crackle?

SNAP is the next big thing. The IPO of the Snapchat company, it saw a huge increase in price due on its opening day. Opening at $19.54, the stock shot up to $24 in the first day, climbing to $27 the next day, and then settling back down to $22, where it has hovered for the past month.

For comparison, FB opened in 2012 at $38, shooting up to $45 that same day, and then falling back down to $38. The stock lost 29% of its value over the next week.

SNAP only lost 10%

TWTR started out at $26. TWTR then SURGED up to $50, before settling to $45 on its first day of trading, a 57% increase in price. It stayed relatively constant over the next 6 days, with only a 2% movement down.

SNAP is a popular stock, with a large market capitalization ($29 billion, much larger than most of the stocks in the SP 500). Facebook sits at a nice $410 billion, and Twitter melted to $10 billion.

Interestingly enough, it was Facebook that suffered the most in the first week of trading, with a 29% decrease in price over the first week, whereas Twitter, as mentioned previously, remained relatively normal.

Furthermore, Twitter increased by 45% over the next month, going up to nearly $65. Facebook only increased 7%.

Look at the charts. A picture says 1,000 words.


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Which stock would you rather own? I know which one I would sell a put spread against – TWITTER! It’s been a brutal ride for investors.

SNAP seems to be following the TWTR path, both in beginning success and similar stories. The two stocks opened with similar market capitalizations, about $30 billion. Also, the two companies have similar problems- how do they generate revenue?

Facebook has its ads, but TWTR and SNAP have no true source of income. How can a company rely be successful if it doesn’t have profits?

It will be interesting to follow the progress of SNAP over the next month. What will happen to the Silicon Valley startup? Will it follow the golden road of Facebook, or will it fall down the rabbit hole like Twitter?

Only time will tell.

Disclaimer: These views are not investment advice, and should not be interpreted as such. These views are my own, and do not represent my employer. Trading has risk. Big risk. Make sure that you can balance your risk/reward, and trade small, and trade often.

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