Snap is vying to price its public offering in a range of $17 to $18 per share, putting the public offering above its range and value the company at $25 billion, sources told CNBC on Tuesday. The stock is expected to begin trading on Thursday.
"An IPO is a pricing war... If you're interested as an investor, you've got to ask, 'Is there value in this game?' While I think there are ways to get to $25 or $30 billion, I mean, those ways are tough to navigate. There are lots of things in the way...It's got to be Facebook lite," Damodaran said.
He gave the company a $14 billion to $15 billion valuation, or $11 a share, he said, which could be considered favorable for a company that posted a net loss of $514 million last year.
Snap is entering the digital advertising market where the incumbents are two powerful behemoths: Facebook and Google.
"That scares the heck out of me as an investor," Damodaran said. "Already Facebook is trying to 'out-Snap' Snap."
But Damodaran also noted that Snap has a devoted user base, something he think sets it apart from Twitter, which now trades well below its IPO price. Damodaran said Snap is more like Facebook than Twitter, because the executives seem to think about the business as a whole.
"As a pricing game, this could go either way," Damodaran said. "This could take off and double in the next six months, because a pricing game can have its own momentum going for it. But as a value game.... rather than track prices, I track revenues and margins, because that's what drives fundamentals."