DAR­LING OR DIS­AS­TER?

An­a­lysts split on whether firm can sus­tain mo­men­tum

New Straits Times - - Business -

SNAPCHAT owner Snap Inc rode a wave of eu­pho­ria in its Wall Street de­but on Thurs­day as in­vestors sent shares of the pop­u­lar mes­sag­ing app soar­ing.

Snap jumped 44 per cent to close at US$24.48 (RM109.02) in its in­au­gu­ral trad­ing day, af­ter rais­ing US$3.4 bil­lion in the rich­est Amer­i­can tech com­pany list­ing since Face­book in 2012.

But an­a­lysts have of­fered mixed views on the fu­ture of Snap, de­bat­ing whether it could mimic the suc­cess of Face­book or end up in the tech junk­yard.

De­bra Wil­liamson of the re­search firm eMar­keter said Snapchat in­spired the same kind of ex­cite­ment as Face­book.

“This is a com­pany that is fun­da­men­tally chang­ing com­mu­ni­ca­tion. And it has a lock on the youth mar­ket, which is crit­i­cally im­por­tant for new tech­nolo­gies.”

Some an­a­lysts are scep­ti­cal about Snap, how­ever, point­ing to Twit­ter, which has seen only mod­est in­creases in its user base since its 2013 ini­tial pub­lic of­fer­ing, and now trades well be­low its of­fer price.

It re­mains un­clear if Snap can ex­pand be­yond its core base of young users or how it will fare in in­ter­na­tional mar­kets in a com­pet­i­tive so­cial media land­scape.

Brian Wieser at Piv­otal Re­search Group said Snap was mas­sively over­val­ued, and set a tar­get price of US$10 for the shares — 40 per cent be­low the of­fer price.

“Snap is a promis­ing early stage com­pany with sig­nif­i­cant op­por­tu­nity ahead of it­self,” said Wieser in a re­search note.

“Un­for­tu­nately, it is sig­nif­i­cantly over­val­ued given the likely scale of its long-term op­por­tu­nity and the risks as­so­ci­ated with ex­e­cut­ing against that op­por­tu­nity.”

it was not clear if Snapchat’s founders had what it took to grow into a ma­jor force, he cau­tioned.

“In­vestors will also be ex­posed to what ap­pears to be a sub-op­ti­mal cor­po­rate struc­ture op­er­ated by a se­nior man­age­ment team lack­ing ex­pe­ri­ence trans­form­ing a suc­cess­ful new prod­uct into a suc­cess­ful com­pany.”

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