On the Snapchat IPO date, there's a way to profit from the social media app without having to buy Snapchat stock.
Buried deep in Snapchat's 178-page SEC filing, Snapchat gave away a $2 billion profit opportunity for savvy investors.
You see, Snapchat committed to pay one company $2 billion over the next five years for an emerging technology. That's $400 million a year in revenue.
And because of the growing demand for this technology, some investors have already experienced double-digit gains in the last 12 months from three companies in this industry:
- Stock No. 1 has climbed 46.84% in the last 12 months.
- Stock No. 2 has climbed 22.67% in the last 12 months.
- Stock No. 3 has climbed 14.83% in the last 12 months.
And the demand for these company's services is only going to increase...
You see, worldwide revenue for this technology is expected to reach $44.1 billion by 2020, according to Statista.
This industry had revenue of just $27.1 billion in 2016. That's an increase of 62.73% in just four years.
Now, we understand that Snapchat stock may seem like an appealing investment.
After all, revenue skyrocketed from $58.7 million in 2015 to $404.5 million in 2016.
That's a year-over-year (YOY) increase of 589.09%.
But here's why our readers need to be cautious...
Why Investors Should Avoid Snap Stock on the Snapchat IPO Date
The biggest reason not to invest in Snapchat stock is that the company is not profitable.
While Snapchat increased revenue from 2015 to 2016, it recorded net losses of $372.9 million in 2015.
The social media app followed that by recording net losses of $514.6 million in 2016.
But that wasn't even the scariest thing in the Snapchat IPO filing...
In the filing, Snapchat said it may never be profitable. Analysts are concerned Snapchat will never be widely used because it's more complicated than other social media sites.
Also, Snapchat included a large list of competitors in its IPO filing that could cut into its revenue.
And that's exactly why we found a better way to profit from the Snapchat IPO date that involves less risk and more upside...
Here's How to Profit on the Snapchat IPO Date
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Snapchat said in its IPO filing it would pay Alphabet Inc. (Nasdaq: GOOGL) $2 billion for its cloud-computing service Google Cloud.
On top of that, Snapchat also said it was negotiating with another cloud provider for "redundant infrastructure support of our business operations."
You see, it's cheaper for Snapchat and other companies to rent cloud infrastructure than to build their own.
According to TheCloudCalculator.com, it can cost $555,748 for ownership of a private cloud over a three-year period. But the cost of using a hosted cloud service would only cost $162,720 over that same three-year period.
And that's part of the reason why the stock prices for Alphabet, Amazon.com Inc. (Nasdaq: AMZN), and Microsoft Corp. (Nasdaq: MSFT) have climbed double digits over the last 12 months.
Google is secretive about its cloud-computing revenue. But Deutsche Bank AG (USA) (NYSE: DB) projected the revenue run-rate (a projection for potential performance) for the Google Cloud Platform was $750 million as of Sept. 13, 2016.
So with Snapchat committing $400 million a year to the Google Cloud Platform over the next five years, that revenue total should increase.
Amazon's cloud-computing service, Amazon Web Services, generated $3.5 billion in revenue in Q4 2016. That's a 45.83% increase from the $2.4 billion reported in Q4 2015.
In Q2 2016, Microsoft's cloud services generated $6.3 billion. In Q2 2017, that climbed to $6.86 billion, an increase of 8.8%.
And according to FactSet estimates, all of these stock prices are expected to climb in the next 12 months...
From today's opening price of $851.38, the GOOGL stock price is expected to climb to $986.57 per share. That's a potential increase of 15.87%. The AMZN stock price is expected to climb to $948.11 per share from today's opening price of $853.05. That's a potential profit of 11.14%.
Finally, the MSFT stock price has a one-year price target of $69.94. From today's opening price of $64.13, that's a potential profit of 9.05%.
While that gain is more modest, Microsoft also pays its shareholders a dividend of $0.39, which is a yield of 2.40%.
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