Venice, Calif.-based Snap began trading on the New York Stock Exchange on March 2. As of now, its shares are worth $28 billion--a whopping 69 times its $404 million in 2016 sales. That gives Snap plenty of ammunition that it could use to add to the nine companies on which it has spent about $500 million to acquire since May 2014.

Snap's valuation can only be justified by hopes for faster growth. And as I argued in my 12th book published last month, Disciplined Growth Strategies, Snap rival Facebook has enjoyed a 58-fold return on its $1 billion Instagram acquisition.

Snap should be cautious with its acquisitions. For each of these proposed deals, it should investigate carefully whether they pass four tests for successful acquisitions:

  • Is the industry attractive?
  • Will the combined companies be better off?
  • Can the combined companies generate more cash in current dollars than the acquisition price?
  • Can the acquirer integrate the target effectively?

Here are three candidates in the social media, camera, and drone industries which appeal to Snap's founders.

Social Media: Pinterest

Buying social media network Pinterest would probably cost Snap about $14 billion--assuming the price was 30 percent above the $11 billion private market value cited by CB Insights.

For that, Snap would get a company that tripled revenue in 2016 to about $300 million with some 150 million users. While Pinterest has traditionally been very popular with women, 40 percent of global sign-ups were men in October 2016, growing at 70 percent from the year before.

Perhaps Snap could collaborate with Pinterest to move beyond awareness and brand advertising to push users further towards purchasing an advertiser's product since Pinterest can get user's attention at the awareness phase, their intention to purchase with search, and finally a conversion when they are pinning products or even purchasing them.

Still, there may be higher payoff ways for Snap to invest its IPO billions. Here are two.

Cameras: GoPro

GoPro had a boffo IPO that sent its shares soaring to nearly $90 a share--now they trade at a tenth of that price. This makes GoPro available for a paltry $1.3 billion.

Were Snap to acquire GoPro for a 20 percent premium--about $1.5 billion, it would add $1.2 billion in revenue--but would be faced with the challenge of reducing a substantial operating loss.

Snap could surely reduce overlapping costs in functions such as human resources, finance, and legal departments. And Snap might even be able to find ways to use GoPro cameras to generate more advertising revenue.

Drones: Parrot

Paris-based Parrot, a maker of drones--among other consumer electronics devices -- hit a high of nearly $50 a share in July 2015. Today, the stock is trading way down -- a little over $8 a share or a market capitalization of around $250 million.

If Snap were to buy Parrot for a 20 percent premium--at a price of $300 million, it would get a company that got over half its $233 million in revenues from drones last year. Sadly, Parrot gave aggressive discounts during the 2016 holiday season which contributed to a $146 million loss last year.

Perhaps Snap could sell off some of Parrot's other product lines and consolidate its overhead functions in Venice to lower operating costs.

Whether Snap can grow into its valuation or suffers a GoPro-like post-IPO plunge depends heavily on whether it applies discipline in spending a portion of its $28 billion IPO valuation.