Will Snap Stock Pass the Facebook Test or Flunk the Twitter Exam?

By Rick Munarriz Markets Fool.com

Snap, Inc.(NYSE: SNAP)is at a fork in the road. Snapchat's parent company has been public for a month, and the country's biggest online IPO since Facebook (NASDAQ: FB) in 2012 and Twitter (NYSE: TWTR) in 2013 will soon follow either Facebook's road to glory or the dark path Twitter has trod down.

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Facebook cratered in the weeks following its IPO at $38, and within four months it was cut in half. The stock has bounced back, of course. Facebook's ability to grow its popularity and monetize its traffic paid off, and Facebook's been a market beater since bottoming out in the fall of 2012. Twitter has gone the other way. It soared out of the gate, and four months later it had more than doubled. It's now a busted IPO, trading for a little more than half of its IPO price of $26. Investors are paying the price of Twitter's inability to grow its user base or cash in on the engagement.

Snap stock may very well carve out a third route. It's not a busted IPO, at least not yet. This story will take time to play out, but the next big test will be a crucial one. Snap delivers its first quarterly report as a public company in a few weeks, and that performance will set the tone for the dot-com upstart's near-term expectations.

Image source: Snap, Inc.

Social disorder

Snap has yet to announce quarterly financials, much less provide guidance on how it felt the recently concluded first quarter would play out. Wall Street is far more chatty. More than two dozen analysts have initiated coverage on the dot-com speedster, giving us a glimpse into at least what the market expectations will be.

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Wall Street pros see Snap reporting $157.2 million in revenue for the quarter ending in March, nearly tripling the $55.3 million it rang up a year earlier. Analysts may be all over map, expecting as little as $125 million and as much as $195.6 million in revenue. Whether revenue more than doubles on the low end or nearly quadruples on the high end, it's heady growth no matter where it lands.

Top-line growth isn't enough to turn Snap into the next Facebook and avoid becoming the next Twitter. Twitter posted triple-digit revenue growth in its first four quarters as a public company. Facebook, on the other hand, didn't come out of the gate running. It posted more modest revenue growth in its first four post-IPO quarters, clocking in between 32% and 40% in that time. However, unlike Twitter, growth began to accelerate after that.

Snap's first test will be in a few weeks, but the market will wait until Snap proves that the growth is sustainable -- as Facebook has and Twitter has not -- before crowning it a market winner or loser.

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Rick Munarriz owns shares of Twitter. The Motley Fool owns shares of and recommends Facebook and Twitter. The Motley Fool has a disclosure policy.