DARLING OR DISASTER?

Analysts split on whether firm can sustain momentum

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.”