From Zacks: Snap Inc. (SNAP), the parent of Snapchat, made its public debut last week, in the biggest IPO since Alibaba’s in 2014. The shares opened at $24 after listing at $17 and surged on the first two days and lost all those gains in the next two days.

Trading in shares has been very heavy and volatile.

While it was a hot IPO, many have been concerned about the valuation. At current share price, the company has a market cap of $26 billion. They had reported net revenue of $404 million and a loss of $515 million for 2016. No analyst has assigned a “Buy” rating to the stock.

Snap has 158 million average active daily users who send more than 2.5 billion messages every day. Instagram, which is owned by Facebook (FB – Free Report) , reported 300 million daily active users and their user growth is outpacing Snap’s. And, Instagram Stories is pretty similar to Snapchat.

Investors should remember that not all IPOs are successful. Investing in smaller, rather unknown companies can be quite risky. A handful of these newly minted companies may turn out to be excellent investments; some may result in big losses.

It remains to be seen whether Snap will grow like Facebook or sputter like Twitter (TWTR – Free Report) . Facebook had an IPO price of $38 per share and is currently trading above $138. Twitter IPO’d at $26 per share and now trades at $15.

Using an ETF approach is a low-risk and convenient way of getting exposure to this ‘hot” corner of the investing world. To learn more about the First Trust US IPO Index (FPX – Free Report) and Renaissance IPO ETF (IPO – Free Report) , please watch the short video below. FPX has already added Snap and IPO is expected to add it soon.

The First Trust U.S. IPO Index Fund (NYSE:FPX) was unchanged in premarket trading Monday. Year-to-date, FPX has gained 5.91%, versus a 6.33% rise in the benchmark S&P 500 index during the same period.

FPX currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 4 ETFs in the IPO ETFs category.

The Renaissance IPO ETF (NYSE:IPO) was unchanged in premarket trading Monday. Year-to-date, IPO has gained 8.61%.

IPO currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #2 of 4 ETFs in the IPO ETFs category.

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This article is brought to you courtesy of Zacks Research.

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