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Why Snapchat's (SNAP) Stock Skyrocketed

by Connor Lounsbury | May 30, 2021

Most people nowadays have heard of the social media platform "Snapchat." It has been adopted by many generations, with even some parents having an account on the application.


Snapchat's Initial Public Offering (IPO) was priced at $17 a share. They saw a 44% increase to slightly over $26 their first day of being listed on the public exchange. This was on March 2, 2017. Fast forward to 2018 where SNAP was at an all time low of slightly below $5. This would have been the most ideal time to get in, but regardless the price of this stock was far too undervalued. Even if the stock was $15, it would still be a meritorious time to buy.


I will go into why I bought this stock in 2018 for about $12 a share. SNAP's user-base consisted of approximately 188 million people in 2018 with steady growth throughout the entirety of its existence. In 2018 when SNAP passed Twitter in users, SNAP's stock price was still tremendously lower than Twitters. In my eyes, this declared SNAP undervalued.


SNAP and Twitter both are mostly not profitable companies. SNAP has not seen profit in years and Twitter only saw profit in 2018 and 2019 since 2012. SNAP has not seen profit at all since 2015, but they have been cutting down on their debt since 2017, giving investors confidence.


In 2019, the stock reached a yearly high of nearly $18. In 2020, the stock reached an all time high of nearly $54. In 2021, the stock reached another all time high of nearly $74. Again, I believe this is due to SNAP's steady increase in users, the slow process SNAP is taking to eradicate their debt, and another reason that was not yet mentioned. This unknown reason is SNAP's valuation.


SNAP was overvalued when their stock jumped to almost $26 their first day of being public. This is because they received a valuation of 25.5 billion dollars in 2017. The company should not be worth this much with the lack of user-base and profit in 2017. SNAP was then valued at 18.5 billion in 2018 and 16.1 billion in 2019. In 2020 when SNAP really began to gain some bullish momentum, they were valued at 19.4 billion. I would consider this to be much more fair. SNAP will continue to see steady growth and I will be holding some SNAP shares for the long-term.


If you check out the chart below, there is resistance at about $64. If that resistance is broken, then we should see SNAP trading at higher levels. Support is at about $57. These prices are key levels that investors use to determine their trades.


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