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Mark Hulbert: The math Snapchat doesn’t want you to see

CHAPEL HILL, N.C. — Simple math is all you need to conclude that Snapchat’s upcoming IPO is an incredibly risky bet.

That’s because the company’s sales will have to grow at a blistering pace in order to support the price at which it is currently slated to come to market. Though anything is possible, you probably should go to Las Vegas rather than Wall Street if you want to place that kind of high-risk bet.

I base these comments on a simple valuation model that focuses on sales rather than earnings. That’s crucial for startups, since most of them—like Snapchat—have yet to produce any profit by the time they go public.

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