Before Snapchat stock is available to the public, the social media company will release its IPO offering price.
And because that price is cheaper than what retail investors will pay when the stock debuts, our readers have been asking us, "Can you buy shares in Snapchat now?"
Unfortunately, the answer is no.
Snapchat shares are not available now because the company has not officially filed for an IPO. But when the IPO does happen, which could be as early as March, retail investors will still not be able to purchase Snapchat stock at the IPO offering price.
We'll get to how retail investors can play Snapchat stock in just a bit.
But first, here's everything you need to know about the popular social media app before its goes public...
What Is Snapchat?
CEO Evan Spiegel describes Snapchat as a "camera company" that gives its users the ability to live in the moment.
Snapchat users can post pictures and videos with filters and animations. Users do have the option to share their posts for up to 24 hours, but standard posts disappear after 10 seconds.
And because of its unique features, Snapchat has attracted a large following of teens and millennials...
According to Bloomberg, 70% of 18- to 24-year-old U.S. smartphone users are on Snapchat. The company is also seeing growth from 25- to 34-year-old social media users.
In June 2013, only 6% of 25- to 34-year-olds used Snapchat. But that number jumped to 41% as of June 2016.
Snapchat users are also very engaged with the app, spending an average of 10 minutes per day on it. In comparison, Instagram users only spend 6.4 minutes on the app per day, according to a study from investment company Cantor Fitzgerald.
And Snapchat's growing and engaged user base is why it could make $1 billion from advertisers this year...
Snapchat's Projected Revenue
Snapchat's lofty $25 billion valuation is mainly based on its projected revenue growth over the next several years.
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For 2015, Snapchat generated $59 million. For 2016, analysts projected Snapchat generated $367 million in revenue, which is an increase of 522% in just a year.
However, there is much more revenue growth ahead in 2017 and 2018...
For 2017, Snapchat is projected to generate between $936 million and $1 billion. For 2018, Snapchat could generate $1.76 billion.
These revenue projections will have some investors racing out to buy Snapchat stock.
But revenue growth alone doesn't make Snapchat stock a good investment.
So when Snapchat goes public, this is how to play the Snapchat IPO...
How to Play the Snapchat IPO
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Before investing in Snapchat stock, investors should review their personal goals and risk tolerance.
You see, the tech sector is notoriously volatile. So if you're a conservative investor, Snapchat stock would not be a good stock to own.
For example, the Facebook Inc. (Nasdaq: FB) stock price traded as low as $18.80 on Oct. 19, 2012, down 50% from its $38 IPO price after just five months.
And the most recent example of a volatile tech IPO is Twilio Inc. (NYSE: TWLO). The TWLO stock price opened up at $23.99 on June 23, 2016, and climbed to $70.49 on Sept. 28, 2016.
That's a 193% climb in three months.
But today, it opened at $29.19 per share. If investors took a wait-and-see approach and bought TWLO when it traded at all-time highs, they would have lost 58% of their investment.
And aside from volatility, there's another huge reason investing in any IPO can be risky...
A new company has not yet earned your money. You're buying into the idea that revenue will grow and the stock price will climb, but the company may only have a few years of earnings or may not even be profitable yet.
There's simply less data to judge, which makes it difficult to evaluate the stock.
But if you do believe in Snapchat stock as a long-term investment, there is a way to play it at the IPO.
"I generally tell retail investors to avoid buying an IPO at the open because the insiders have already made all the money available at the debut," Money Morning Director of Tech and Venture Capital Research Michael A. Robinson told me on Oct. 25, 2016.
"My exception to this rule is to put in a limit order that is fairly tight from the offering price. Otherwise the risk is you buy at the top and then go upside down. That's a big risk to carry with a new issue that hasn't hit the lock-up date," Robinson said.
And even though Robinson wants investors to take a cautious approach, he still believes a successful Snapchat IPO would be great for the tech industry and the IPO market.
"Having said that, I'm hoping to see a very successful IPO since Snap Inc. is a high-profile unicorn with a pre-market valuation of $17.8 billion at its last round. So, if reports of a $25 billion valuation at the open are true, that's great for the entire tech industry, the IPO market, and the overall value of the social networking market," Robinson told me.
Bonus Opportunity
Because this could be one of the biggest IPOs in years, we know investors have a lot of questions. That's why we made this guide for our readers that covers everything you need to know about the Snapchat IPO.