Why Facebook Snapping Up Snap Is Unlikely
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Version 0 of 1. Analysts and investors have long debated the merits of one question in particular: Would Facebook (FB) ever try to buy Snap (SNAP) ? For now, the answer seems to be that it's possible, but unlikely. FBN Securities analyst Shebly Seyrafi has made the case for why such a deal would make sense and the main reason is that, in doing so, Facebook would eliminate one of the "very few" long-term threats to its business. Data has shown that Facebook is losing a great deal of its teenage users as they move over to Snapchat -- a trend that the social media giant shouldn't ignore. Shares of Snap were up 0.2% to $22.88 on Thursday, while those of Facebook were up 0.4% to $138.24. "Facebook should take the Snap threat very seriously, particularly since there are predictions of much stronger growth at Snap outside the 12-to-24 age cohort which, so far, has been the company's key demographic focus," said Seyrafi, who initiated shares of Snap with a Sector Perform rating and $23 price target. So far, no analysts have given Snap a Buy rating. Snap's stock price could continue to fall, forcing the company to explore alternatives such as being acquired, as Twitter (TWTR) has, Seyrafi said. And at a lower stock price, Facebook could be willing to pay at least $20 billion (or $14 a share) for Snap. It wouldn't be the first time that Facebook has tried to scoop up its formidable social media rival -- Facebook in 2013 offered $3 billion to buy Snap (then Snapchat), but the bid was later rejected. Facebook has also made similar large deals in the past for hot start-ups, shelling out $21.8 billion for WhatsApp in 2014. Facebook and Alphabet are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells FB or GOOGL ? Learn more now . |