By Lucinda Shen
March 9, 2017

Snapchat’s $32 billion valuation, where it landed a day after the IPO, must have looked downright bizarre to some investors, considering its lack of profitability and waning user growth.

That’s probably why shares of Snapchat’s parent company, Snap Inc., have slid 19% since their all-time high Friday. Short sellers, it appears, began borrowing the stock and betting it would go down this week. What’s more, not a single Wall Street analyst called the stock a “Buy” following Snap’s IPO.

But for one prominent short seller Andrew Left, who drew attraction to the problems at scandal plagued pharmaceutical giant Valeant, betting against Snap doesn’t seem like a good idea right now. After all, the company has yet to post its first post-IPO quarterly earnings.

“I wouldn’t count Snapchat out so fast before they even have a chance,” he said. Left currently does not have a position in Snap, though he is watching the stock. “It’s a compelling product with the right demographic. The argument is can management execute the product or not?”

To Left, Snap’s 11 digit valuation isn’t “expensive” or “ridiculous.” Investors are forgetting that it costs relatively little for Snap to add new features or new users—meaning it can turn a profit quickly—perhaps even in two quarters, he said.

While Snap’s IPO reportedly attracted many young investors who could cite their personal experience with the application as their field research, 46-year-old Left doesn’t use the application.

What he does have is three teen-aged kids who are constantly on Snapchat. And when Left asks teenagers, including his own children, which social media platform they use most, it’s invariably Snapchat.

And he’s not the only professional investor to cite their kids as part of the reason for buying Snapchat: Appaloosa Management’s 59-year-old founder David Tepper, who said on CNBC Wednesday he purchased shares of the company during its initial public offering, did the same.

“My youngest daughter loves the thing. Anybody between 12 and 25 loves it,” Tepper said on CNBC, saying he believed that it had a hold on the younger generation. “It’s kind of anti-Facebook in that generation, too.”

Left also believes Snap could serve as serious competition to social media giant, Facebook, which Left is shorting in part due to Snap’s rise.

And even if Snapchat bulls are wrong about the company’s prospects, one analyst says that the stock still has a safety net: Facebook. According to a Thursday research note from FBN Securities analyst Shebly Seyrafi, who gave Snap the equivalent of a “Hold” rating, Facebook may still seek to acquire Snapchat, a move that could limit how much Snap shares can fall.

Still, Left said he could change his mind should he hear “ugh, Snapchat is dumb,” come out of a teenager’s mouth.

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