Snapchat Shares Are Already Plunging

Snapchat shares are already plunging... Why the selling could continue... Steve Sjuggerud and Ben Morris aren't alone... 'The worst is over' in uranium... When Stansberry Research analysts agree... How to save a small fortune in trading fees...


Well, that didn't take long...

Yesterday, shares of ultra-popular social-media company Snap (SNAP) fell more than 12% to close at $23.77.

It took less than three trading days for the stock to fall below its post-IPO trading price of $24 per share. And more downside could remain ahead...

Research firm Bespoke Investment Group notes that Snap is the only $20 billion-plus market-cap stock in the U.S. with zero analyst "buy" recommendations. According to financial-news network CNBC, eight firms have initiated coverage, with six giving SNAP shares a "sell" rating. And comments from these firms were even worse. From CNBC...

Analysts at Needham initiated coverage of the social media firm's stock with an "underperform" rating, noting the company's total addressable market is 80% smaller than Facebook.

"Prospect Theory would label SNAP a 'lottery-like' stock," they said in a note Monday. Atlantic Equities, Morningstar, Nomura Instinet, and Pivotal Research also gave the social media company a "sell" rating.

Brian Wieser, a senior analyst at Pivotal Research, said in a note that Snap "is a promising early stage company with the significant opportunity ahead of itself. Unfortunately, it is significantly overvalued given the likely scale of its long-term opportunity and the risks associated with executing against that opportunity."

According to research firm FactSet, analysts are more bearish on Snap than any other large-cap U.S. stock...

They have a current median price target of just $15.50 per share... representing another 35% of downside from yesterday's closing price.

But even if Snap can exceed analyst expectations, today's shareholders may be disappointed. As respected financial newspaper Barron's explained over the weekend...

Even assuming strong growth, it's hard to justify more than half the current stock price. Snapchat looks more like Twitter (TWTR), which fizzled, than Facebook (FB), which sizzled...

The bull case for Snap is that it offers a unique advertising platform targeting a young demographic that's difficult to reach through television and other traditional media and that brand advertisers will pay to get.

However, huge advertising growth is already reflected in Snap's stock price. The company is valued at some 34 times projected 2017 revenue of $1 billion based on its enterprise value (market value less net cash). Facebook fetches 10 times sales.

We also note that today was the first day that SNAP shares could officially be shorted...

This is because Federal securities laws require brokers must be able to locate shares before they can accept short orders. And Thursday's first post-IPO trades only began to "settle" today.

Shares were down another 11% to less than $21 per share as of midday trading. SNAP has now fallen nearly 30% from its post-IPO highs.

Regular Digest readers know our colleague Steve Sjuggerud recently turned bullish on uranium for the first time in years...

As we noted in the February 9 Digest, Steve noticed back in October that uranium met two of the three criteria he looks for in an investment: It was incredibly cheap and incredibly hated. But he was still waiting for the third – an uptrend in prices – before buying.

Last month, the uptrend was finally confirmed, and Steve said it was time to buy. As he wrote in our free DailyWealth e-letter at the time...

My friends, we have that uptrend now... in spades. Uranium is up 47% since bottoming in November.

Besides that, it's cheap – relative to its highs from 10 years ago around $140. And finally, it's hated... After 10 years of terrible performance, absolutely nobody is talking about uranium today. Nobody is interested in uranium except me... and my subscribers.

Uranium finally has exactly what I want to see in a trade. It's cheap, hated, and in an uptrend. You haven't missed it yet... Get on board, now...

Steve then "doubled down" on this call the following week, when he explained another powerful reason uranium could be headed much higher...

In short, Steve said the situation in uranium stocks today is remarkably similar to those in coal stocks and gold stocks recently. As he wrote in the February 16 DailyWealth...

"When was the last time a sector or an industry went down six years in a row?" I asked my good friend Meb Faber at lunch in New York last November. Meb is the guy to ask... He is one of the smartest, most respected minds on Wall Street. And he has crunched the numbers going back decades.

"Six down years? It NEVER happens," he said. "But coal stocks ended 2015 down five years in a row." Based on this fact alone – that coal stocks went down five years in a row – Meb told his subscribers in late 2015 to buy coal stocks. He got it exactly right... Coal stocks finished 2016 up 98%.

Meb scours the globe, looking at investments differently than most analysts do. So when he started telling me about his research on buying after multiple down years, I was interested. Here's another example: Meb said that gold stocks were down five years in a row ending in 2015. And like coal, gold stocks absolutely soared in the first half of 2016.

As Steve explained, Meb said to buy coal stocks and gold stocks at the end of 2015 not because of a significant fundamental change. It was purely because they had fallen for so long...

Meb didn't create the script for coal – or gold. He chose them simply because he knew what happens after five down years... Meb has run the numbers going back to the 1920s on how sectors perform the year after multi-year declines. Here's what he found:

Number of Down Years Average
Gain
3 35%
4 57%
5 65%

As the table shows, the average gain in the year after a consecutive number of down years is shocking. The rarity of multiple down years is shocking, too...

For example, four consecutive down years in a sector has only occurred 1% of the time since the 1920s. And five down years has almost never occurred. In other words, opportunities like this don't come along often.

In fact, Steve noted the situation in uranium stocks is actually even better than this. They have declined for six straight years, suggesting triple-digit upside is likely...

Uranium is cheap and hated. And now, it's finally starting an uptrend. But the fact that it fell for six straight years is one more reason I'm excited about it.

You see, over the long run, reversion to the mean is an incredibly powerful force in financial history. When coal stocks reverted away from the mean for five years, they snapped back violently in 2016. And the same thing happened with gold stocks.

Today, the opportunity in uranium is nearly identical to the ones in coal and gold last year. Uranium stocks have fallen for six straight years. And now, they've silently entered an uptrend. I expect uranium stocks will be a big winner in 2017. And now is the time to get on board...

But Steve wasn't alone...

Last month, DailyWealth Trader editor Ben Morris told his subscribers it was time to buy uranium stocks, too.

Uranium had also been on his radar for months. And last month, after uranium confirmed its new uptrend, Ben recommended pulling the trigger on a basket of uranium stocks.

Last week, two more Stansberry Research analysts turned bullish, too...

Writing in the March issue of Stansberry Research Resource Report, analysts Bill Shaw and Bill McGilton explained that the fundamentals for uranium finally appear to be improving.

As they noted, public sentiment toward nuclear power has been terrible for decades, following 1979's Three Mile Island accident in Pennsylvania. And 2011's Fukushima disaster in Japan only made it worse. From the issue...

When a tsunami hit Japan's coast in March 2011, its nuclear reactors all automatically shut down. Radiation fear circled the world causing governments to take hysteria-fueled moves against nuclear energy.

Countries like Germany, Belgium, and Switzerland have taken decisions to shutter their nuclear reactors.

Uranium producers, which supply the necessary ingredients to fire up these power plants, have seen the prices of the commodity they produce decline for the past six years.

But now, things are starting to change...

Why? Because the world needs more and more electricity every year. And growing concern about fossil fuels and climate change leaves nuclear power as one of the few practical alternatives. More from the issue...

Today, there are approximately 7.5 billion people on the planet. That will rise to 8.5 billion people by 2035... all of whom will need electricity. Our work, entertainment, transportation, heating, and cooling systems all require more and more electricity. By 2035, the world's electricity demand will be 50% greater than today. More people will need more electricity to power their lives.

We need an energy source to make up the difference. The obvious first choice is to build more fossil-fuel plants. But that comes with economic and environmental costs that not all groups of people are willing to bear.

That has many people investigating "renewable" sources of energy. But you can forget powering the grid with wind and sunshine. The big problem with wind is that it doesn't always blow. And of course, with solar energy... well, there's night.

So the search for clean, abundant, viable energy sources always leads us back to uranium.

As they noted, the best example of this trend today is Japan, which is now returning to nuclear power again for the first time in years...

Even Japan, devastated by the Fukushima disaster, decided there is no choice but to turn the reactors back on. Japan's economy needs cheap energy to manufacture competitively. It had 54 reactors operating pre-Fukushima. Today, there are only three in operation. But 26 are in the process of being restarted. Ultimately, most of Japan's reactors will restart.

With electricity demand growing everywhere, the need for nuclear power will only increase from here... These reactors are going to need uranium – a lot of it.

In the meantime, there are already signs that years of supply-and-demand imbalance are reversing...

More from the issue...

We want to invest when the commodity cycle is at its bottom... And right now, uranium is showing the classic signs of a commodity bottom. And it's about to roll over... Recent developments indicate supply is starting to tighten.

In January this year, Kazakhstan announced it was cutting production. KazAtomProm, the national operator of Kazakhstan and largest uranium company in the world, is now reducing its 2017 production by 10%. The company extracted 21% of the world's uranium in 2015... Other companies are also reducing production.

These conditions are ripe for investing in the commodity cycle... Spot prices are below production costs. Companies are cutting uranium production. Inventories are starting to roll over. At the same time, more reactors are coming online to meet the demand for electricity.

Of course, they don't expect uranium prices to "boom" again immediately...

But that's OK. To borrow a phrase from Steve, things are going from "bad to less bad" in uranium, and that's where some of the biggest returns are often made...

We've talked a lot about commodity cycles in the Stansberry Research Resource Report. You know that markets can often fly higher than you can imagine, and fall further than you can possibly predict.

We believe that investing at the bottom of these cycles is the best way to make a fortune in the markets. And the smartest way to invest in these cycles is to wait for a bust. That is where we are with uranium...

We don't expect optimal conditions to return immediately... It will take years for the cycle to fully deliver on an uptrend. But the worst is over.

As we often write in the Digest, whenever several Stansberry Research analysts agree, we always take note...

Remember, unlike many other firms, we're completely independent. We're not beholden to advertisers or the companies we're analyzing. We work only for you, the subscriber.

We've hired some of the best analysts in the world, and no one – not even Porter himself – tells them what to write.

Naturally, this means they sometimes have differing opinions. But it also means when several agree – like they do about uranium today – you should pay close attention.

One last note before we sign off today...

Yesterday, we mentioned several discount brokers recently slashed their trading commissions. But our colleague Dr. David "Doc" Eifrig says you could do even better than these already-reduced rates simply by negotiating with your broker.

He asked us to pass along a recent reader Q&A from his excellent (and free) Retirement Millionaire Daily e-letter...

Q: I enjoy reading all your work. Here's a tip you can share with your readership.

Brokerage houses want your business, and they will even give free trades to get it. I just switched one of my IRAs from TD to Fidelity. They gave me 250 free trades that are good for two years. I realize some people get in a comfort zone with a brokerage and the new website might be a deterrent. I make at least 15 options trades a month in the account, so switching will save me over $2,000 dollars in commissions. As they say, it isn't what you make, it's what you keep.

By the way, it might not even take changing brokerages. Make a call to your current broker and mention "the other guy's" deal, and they may give free trades to keep the account. – J.D.

A: These are two great tips. They're tips my team and I have used, and I've recommended them to my Retirement Millionaire subscribers – especially when a great offer comes up.

In general, I recommend buying individual stocks through discount brokers where your commissions and transaction costs are lower than 1%... and the lower the better. With a discount broker, you interact mainly with their websites.

In exchange for accepting less human contact and spoon-feeding, discount brokers lower your transaction costs considerably. The fees and charges are small, which means more money for you. Usually the number of free trades will depend on how much money you're transferring to a broker – and sometimes they even offer cash bonuses. Thanks for sharing, J.D.

New 52-week highs (as of 3/6/17): Automatic Data Processing (ADP), Allianz (AZSEY), and PowerShares S&P 500 BuyWrite Fund (PBP).

In the mailbag, one subscriber comments on lower brokerage fees... while another shares his results with our precious metals research. Send your questions, comments, and concerns to feedback@stansberryresearch.com.

"Glad to hear about the reduction in fees. However, you missed Scottrade: I had been surviving on $6 per trade, but suddenly it was less than $5. Not sure of the exact amount since I have only been selling today when it happened. I have a $6 rate from TD Ameritrade and $4.99 from E*Trade..." – Paid-up subscriber Loren K.

"Thanks to great advice from Porter and Steve, I invested in precious metals in late 2015 and 2016. My portfolio has been somewhat volatile but overall has been in a [well] defined uptrend. Last year was up 26.5% and almost 10% so far this year. Keep the recommendations coming." – Paid-up subscriber Peter D.

Brill comment: We're glad to hear you've done well. Peter. As we mentioned last week, despite the recent pullback, we believe gold and silver are likely to do even better this year than they did in 2016. To ensure every interested reader can take advantage, Porter has agreed to open his exclusive Stansberry Gold & Silver Investor service to new subscribers for just the next few days. Click here for the all details.

Regards,

Justin Brill
Baltimore, Maryland
March 7, 2017