Michael Nathanson, senior research analyst at MoffettNathanson, described Snap as a “field of dreams.” Even with rosy growth forecasts, “at $22<br />billion, we’re looking at a stock trading at five to eight times estimated revenues in 2020,” he said before the valuation rose even higher.<br />“They would need to grow for the next 10 years at more than 50 percent every year with a profit margin of 25 percent, which is extremely high given<br />that they are now losing money rapidly.” He noted that very few companies had achieved such growth rates in the history of American business.<br />“I’m concerned that investors will have to wait a very long time, if ever, before they see any meaningful appreciation.”<br />About the best Mr. Nathanson and Mr. Gold could come up with: Snap’s valuation isn’t “patently crazy.”<br />Tell us what you think<br />How a Money-Losing Snap Could Be Worth So Much -<br />Testing the upper limits of valuation, Snap’s investors are betting on the kind of rapid growth that few, if any, companies have ever achieved.<br />“It’s not about economics.”<br />But Snapchat’s growth slowed sharply in last year’s fourth quarter — just about the time Instagram started<br />its own version of Stories, a popular Snapchat feature where users post a sequence of photos or videos.<br />The Snapchat story “is all about growth,” Mr. Nathanson said.<br />The sky’s the limit and history is not a guide.”<br />To justify Snap’s valuation, “you have to make some very lofty assumptions,” Mr. Hamilton said.
