A SNAP INVESTMENT?
IPO may be best way to induce target audience to join market
Amelia Montooth, 19, a college student from Phoenix, uses the Snapchat app all day, snapping photos and watching Cosmopolitan video updates.
Now that Snap Inc., the parent company of Snapchat, is planning to go public, she thinks it would be a “really good investment,” she says. “People use it more than Facebook” (at least in her circles), “and it can only grow.”
Are there others like her, and could this spur more stock interest from a generation both technologically savvy and large- ly disinterested in the stock market? That’s one question swirling around Snap’s $3 billion IPO, expected in March.
In its S-1 filing of public regulatory documents to the Securities and Exchange Commission, Snap pointed out its base of young people, folks who, according to discount broker TD Ameritrade, generally invest in companies they are familiar with. Snap’s target and primary audience is 18 to 24 years old, and they’re loyal. Users younger than 25 visit the app more than 20 times a day, on average.
Shares of Apple, maker of the iPhone, are the most widely held by Millennials, according to TD Ameritrade, followed by Facebook and Amazon.
When Facebook had its IPO in 2012, “we saw a lot of adoption from the younger generation,” notes Nicole Sherrod, managing director of trading for TD Ameritrade. Millennials “invest in what they know about and are heavily skewed towards tech, because they use these products,” she says.
As a rule, Millennials don’t invest — only one in three currently own stock, according to Bankrate.com, while about 50% of the older generation (35 to 70) do invest. They don’t put money in the market either because they’re short on cash and/or paying off student loans, or having lived through the tech bubble in 2001 and 2008 financial crisis, are shy about entering the market, Sherrod says.
But Jordan Adishian, 21, a student at the University of Southern California, remembers how huge he thought Twitter was go-
ing to turn out in 2013 when the company went public. He made his first investment, $200, only to see the stock tank.
“I bought it for $40 a share, and it’s $16 a share now,” he says.
He uses Snapchat daily but isn’t keen on investing. “It’s good, but there will be something new in a year that will get everyone’s attention as Snapchat first did.” To potential investors, he says, “wait it out a little bit.”
Shazir Mucklai, 20, a student at the University of Texas, has read enough about the Snap offering to know he doesn’t want it. “It’s overvalued,” he says.
Marc Kawkabani, 20, a USC business major, disagrees, pointing to its 158 million users. “It would be a good investment,” he says. “It’s a massive application, and millions of people use it.”
Julie Ask, an analyst with Forrester Research, thinks getting young people to buy Snap stock is going to be a “tough sell.”
The Millennial audience lives at home longer, and with hefty college loans and other expenses, households under 25 have 82% of the purchase power they had in 1973.
Millennials “have no use of the (Snapchat) app after 35, and that’s when they start having money to spend,” she adds.
For Solomon Scott, 25, an app developer with the Chief Agency in Washington, D.C., Snapchat’s innovation in bringing graphics and fun to photos and videos has been left in the dust by Facebook and Instagram, which have copied many of the most popular features.
“Snapchat looks to be more of a fad,” he says. “It started something new, but others did it better.”
Julia McCaffrey, 21, a USC student from Ridgefield, Conn., is sticking with Snap — as a user.
“It’s genuine, and you can show off your personality,” she says. “Instagram feels so rehearsed.” But as for investing? “It will do well,” she says, but she’ll take a pass. “I feel like tech trends change pretty fast. Snapchat has been really popular a long time. I’d want something before it became popular.”
But count in New Yorker Danny Babineau, 20, who says he “probably” will invest. Snapchat has “completely untapped potential,” he says. “It’s not just a social media app.”