3 Reasons To Avoid SNAP Stock

1. User Growth is PLUMMETING

For an unprofitable social media company to have any chance at being profitable, it needs grow its user base. Snap Inc.'s user growth is actually decreasing quarter over quarter, which is a big warning sign for any potential investor.

Here are the user growth metrics for the last 5 quarters:

SNAP Inc User Growth (%)

2. Severely Overvalued

SNAP, at the time of writing, is valued at over $20B with revenues of only $150M in the last quarter and losses of over 2.2B in a single quarter. SNAP is not only unprofitable, it is losing money at an unsustainable rate.

In fact, if SNAP continues to hemorrhage cash as quickly as it has last quarter, it might only have a 18 months before it goes bankrupt. 

The reason that previous social media IPOs such as Facebook and Twitter were able to succeed was because of a growing user base with growing revenues per user. As you'll see, SNAP actually has a decreasing revenue per user.

3. Revenue per User is Abysmal (and Decreasing)

Snap Inc reported revenue per user to be $0.90, down 14% since last quarter. To give you some perspective on this. Facebook's revenue per user is now close to $20.00, more than 20x Snap Inc's. 

Check out Facebook's revenue per user since IPO: 

Facebook never had any decreasing years of revenue per user, and was able to grow this metric while growing its user base

For these 3 reaons, and many more, we are staying away from SNAP stock until we see growth in some of these key metrics.  

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