Received an email about Snapchat and Bitcoin. Is Snapchat a buy after the bad earnings report?
As of 5/11/2017, Snapchat is down 20% on a weak earnings report, falling from $22 to $18. In an earlier post, I recommend Snapchat in the low $20′s. I argued that Snapchat could either fall to $10 should it be a dud like Twitter, or rise as high as $60-80 if it’s able to become just 1/4 as successful as Facebook.
The loss was due to IPO and compensation fees: Snap said that its hefty net loss of $2 billion during the quarter was attributed to stock-based compensation related to its February initial public offering.
Does this portend poorly to Snapchat’s future? Too soon to tell. Keep in mind Facebook stock fell from $38 after going IPO to as low as $18 (now it’s much, much higher).
My buy-in point is $22 and I allocated 10% of my account to the purchase, so even if Snapchat were to fall to $11, it would only be a 5% loss of the total account. So I’m down about 18% on Snapchat, but this loss is small compared to my gains from other stocks such as Amazon, Facebook, and Google, as well as Bitcoin. As with all investing, diversification is key. Again, this is a binary bet…either it will be a $100+ billion dollar social media advertising empire, or just another app. So if someone were going to buy Snapchat, I would allocate no more than 10%.
Regarding Bitcoin, the best way to buy is on Coinbase, and failing that, offline. Coinbase is ideal for large transactions. That’s where I bought my coins. Afterwards, the coins should be moved offline to ‘cold storage’, which means storing the coins on an offline computer or on a paper wallet. Leaving coins on an exchange incurs the possibility of the exchange being hacked and the coins lost.