Snap's (NYSE:SNAP) IPO rally was fun while it lasted, however the trend seems to have changed now. I did not expect the trend to reverse so soon. In fact, I was hoping that the hype surrounding Snap prevails for at least a month, so that I could write a timely piece about shorting the stock.
Since Snap went public just a few days ago, it is not possible for investors to short it for at least 30 days after it went public. However, albeit a bit late, I think investors who had partaken in the IPO should consider selling out their positions as soon as possible.
With Snap current commanding a valuation of over $20, despite burning through money and reporting revenues of just $400 million, I think there is no sensible reason to hold the stock.
Granted the market seems to be very generous when valuing social media companies, but Snap is overvalued even by those lax standards.
Snap is not Facebook and it probably never will be. The company's growth is already stalling and it may maximize its reach a lot sooner than many expect. With daily active user growth coming to a near-halt, I don't see how Snap can grow into its current valuation despite the dip.
Given the overvalution and stalling growth, I think investors should definitely consider selling Snap before the downtrend gets worse.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.