Once you get past the hype, there's little chance for long-term gain with this stock.
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Shares of Twitter surged 73 percent jumping from an IPO price of $26. In the month since the stock price has gained five cents.
By Jonathan Berr
Shares of Twitter (TWTR) surged 73 percent in their first day of trading Nov. 7, jumping from an IPO price of $26 to close at $44.90. In the month since that market debut, the stock price has gained just five cents.
Even that meager increase is impressive compared with, say, Facebook’s first month of trading, in which the social networking giant’s stock plunged 20 percent. And Twitter’s performance is all the more remarkable given that skeptics continue to raise questions about whether its growth rates are sustainable and whether expectations that it will be profitable in 2015 are realistic.
Anup Sirivastava, an associate professor of accounting at Northwestern University’s Kellogg School of Management, noted that profitability can be a “vague” concept. “A more valid question is – can Twitter generate positive free cash flows in 2015,” he wrote in an email. “And the answer is an emphatic no….”
As Twitter itself noted in its IPO filing, challenges abound. The company had about 232 million monthly users in the three months that ended September 30, a 39 percent year-over-year increase. Not surprisingly, Twitter expects to run into what financial pundits have dubbed “The Law of Large Numbers,” whereby the bigger a company gets the harder for it is to grow.
Twitter also is expensive to operate. Total costs and expenses were $95.7 million in 2010 and more than quadrupled to $394 million in 2012. Odds are that they will continue to skyrocket as the company buys more servers to meet the growing demand for its service, continues to surge both in the U.S. and overseas and adds employees in key areas such as advertising sales.
Twitter skeptics include analysts at some of the very underwriters who took the company public. Analysts for Twitter’s five lead underwriters initiated coverage on the San Francisco-based company last Monday, on the first day after the so-called quiet period around the stock expired.
Those five took very divergent views on the stock.
As The Wall Street Journal noted, only two – Goldman Sachs and Deutsche Bank – initiated coverage on the microblogging site with a “buy.” Two others – Morgan Stanley and J.P. Morgan – issued neutral recommendations. Bank of America Merrill Lynch analyst Justin Pope, noting the company’s “attractive growth but unattractive valuation,” seemed far more impressed by the Twitter service than the company’s stock. He rated the shares “underperform,” the equivalent of a “sell.”
By conventional stock valuation measures, Twitter is clearly expensive. Since it doesn’t make money, investors can’t use the traditional metric of price-to-earnings ratio to measure the stock’s value. But the shares trade at 41.9 times sales, well above Facebook’s 16.2 multiple.
“Twitter's current valuation cannot be justified by its fundamentals,” Sirivastava writes. “The growth implicit in current valuation is not impossible to achieve, but is improbable. The question is not whether Twitter will one day be profitable. The question is what kinds of profits it needs to generate to justify its current valuation. These levels are too optimistic given any realistic growth trajectory.”
Other analysts still have high hopes for Twitter. Indeed, Deutsche Bank is forecasting that Twitter can achieve a compound annual growth rate of 30 percent with revenue hitting $1.5 billion in 2015, more than double the $640.19 million analysts are forecasting for 2013.
Whether it can achieve those growth rates or not, Twitter does have plenty going for it. Analysts are impressed that company has become an integral part of many television shows and think it has potential for growth in retail. They also note its strong foothold in mobile given how many access the site with their tablets and smartphones.
Still, the question of profitability is bound to linger for a while. S&P Capital analyst Scott Kessler expects Twitter’s 2015 profit according to generally accepted accounting principals to be “modest.” He sees a tough road ahead for Twitter and expects it to lose 30 cents per share in 2013 and 14 cents a share in 2014.
“We think in many ways Twitter has a nice global platform,” he said. Kessler warned, though, that, “social media, technology and tastes do change. They can in many cases unexpectedly and quickly.”
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The Fed may start tapering in just a few months. Here are a few of the likely winners and losers.
Second, the Fed will ease off its massive stimulus program (known as quantitative easing, or QE), which is likely to allow long-term rates to rise to levels that truly reflect global economic activity. (The QE program has kept a lid on long-term rates.) I discussed this notion a few weeks ago in my look at the soon-to-change yield curve.
Saks, Tommy Bahama and other retailers are adding alcohol to their locations, hoping that shopping under the influence helps their bottom lines.
Endless lines. Pushy crowds. Hearing "The Twelve Days of Christmas" for the umpteenth time in a matter of hours. Spend a little time shopping this holiday season, and odds are good you'll want a good stiff drink.
Not that you need to abandon your basket to grab one. More clothing retailers are branching out into the cocktail scene, offering customers the opportunity to pause mid-shopping trip for a drink and small plates of food.
Just hang a right at menswear and walk past women's shoes to the in-store bar.
Saks, Urban Outfitters (URBN) and Brooks Brothers are among the brands that have recently announced plans to build out bar and restaurant spaces in stores. Old hats at the restaurant-retail combo are expanding, too.
There's reason to believe a reduction in the Fed's bond purchases has already been priced into the action.
Investors avidly awaiting signs that the Federal Reserve is ready to reduce its monthly stimulus may find that the news already has passed them by.
Tapering, as the market calls it, easily has been the market's main concern, and in fact only worry other than sustaining the modest growth in both earnings and gross domestic product.
That worry began in May of this year when Fed Chairman Ben Bernanke first raised the prospect during a congressional hearing, and speculation over when it may start has been a major market-mover throughout.
Finding companies set for solid profit increases at a reasonable price is always a winning strategy. By that standard, here are next year's most appealing firms.
In a tough economic environment, food companies are sharpening competitive strategies. Here's how 3 biggies have fared recently.
By Karen Riccio
Investor Steve Cohen boosted his stake in The Fresh Market (TFM), a hedge fund cut its ownership in Safeway (SWY), and Kroger (KR) reported disappointing third-quarter earnings -- and all this action happened in just the past couple of days.
It's just another frenzied week in the grocery industry, as huge chain stores fight for consumers' dollars and loyalty on a daily basis.
In a fiercely competitive environment with low margins and high stakes, the chains must cater to all types of grocery shoppers, their wants and needs, tend to the little idiosyncrasies and keep customers coming back. That’s no easy task. One bad experience can easily send a shopper packing for another store.
Welcome to the world of grocers, where repeat business is king and the key to success.
The company's opportunity in the Middle Kingdom will be a significant catalyst for the stock, says 1 analyst.
BMO Capital upgraded LinkedIn shares Friday and also raised its price target. The firm believes that the company will be officially launching in China soon, and may be able to monetize that geography as soon as 2015. The social networker already has 3 million users in China.
The rollout of the new national health care plan has been far from perfect, but some sectors may get an Obamacare bump.
The rocky rollout of Obamacare is in its second month and there are still a large number of uncertainties hanging over the healthcare industry as a whole.
For starters, the website is still experiencing issues holding back the potential number of people that could be enrolling. Then there is the one-year suspension of the employer mandate and now cancelled plans can be kept for another year.
All in all, the plan has not enjoyed a smooth introduction to the public. However, there is still enough data out there to suggest what the end result may be for some health care sectors. For example, more people with health insurance equals a higher demand for health care services and products, including drugs.
Shares of the food company are up nearly 50% this year, and it's hard to justify buying in now at $45.
By Richard Saintvilus
NEW YORK (TheStreet) -- There's not much a company can do when the Street has fallen in love with its stock. While some management teams will look for opportunities to play down expectations, there are companies, like Hormel (HRL), that revel in the challenge, especially when they know their growth prospects are actually better than perceived.
But I believe Hormel's stock, which has posted year-to-date gains of close to 50 percent, is expensive. I'm saying this even though I know that the company has a long history of margin expansion and above-average growth. Not to mention, when it comes to strong returns on capital, Hormel has compared favorably to other well-established brands, like Nestle (NSRGY) and Kraft Foods (KRFT), which I happen to like.
The cosmetics company's disappointing earnings report is yet another illustration of how difficult the retail sector has become.
"Tougher-than-expected sales environment . . . heightened promotional environment . . .
heightened promotional environment of the holiday season . . . highly promotional holiday season . . . highly promotional holiday season . . . less certain consumer environment . . . an environment that looks to be more promotional."
Believe it or not, these were all heard on one conference call Thursday night: that of Ulta Salon (ULTA), following a report that showed a quarter going steadily downhill as the months dragged on.
If you don't know Ulta, then you don't know the high-growth retail world. It's a world where some companies believe that there is endless demand for more stores, and that the idea, when executed properly, never runs out.
The company leans on the electric-car maker for help providing power when the sun isn't shining.
One of the biggest bearish arguments against solar stocks has always been the simple fact that the sun doesn't always shine.
Musk is one of the original founders of SolarCity and sits on the board of directors. Musk's cousin, Lyndon Rive, is the company's CEO.
According to Businessweek, the batteries will be available to commercial customers at first. The company is conducting pilot tests with its residential customers in California.
The retailer labels the character's fake memoir as nonfiction. This comes weeks after it categorized the the Bible as fiction.
By Karl Utermohlen
Costco (COST) put "Anchorman" character Ron Burgundy's faux memoir in its nonfiction section, marking the second time in weeks that the retailer has made an embarrassing book-labeling decision.
Some Los Angeles branch employees must not know much about pop culture, as they thought Ron Burgundy (pictured) was real, according to The Daily Mail. "Ron Burgundy: Let Me Off at the Top! My Classy Life and Other Musings" is a memoir based on Ron Burgundy's fictional life from the 2004 movie "Anchorman."
The blunder comes weeks after a pastor posted a photo on Twitter of the Bible being labeled "fiction" in a Costco store. Many Christians vowed to never shop at Costco again after seeing the holy book in the fiction section despite the company’s apologetic remarks.
Jeff Bezos knows how to get the media excited about his company. But is that enough?
As the Thanksgiving weekend wound to a close Sunday night, I happened to watch the "60 Minutes" interview with Jeff Bezos, the billionaire CEO of Amazon.com (AMZN).
At the end of the interview, Bezos (pictured) unveiled a "surprise" for correspondent Charlie Rose and his TV viewers, revealing that Amazon is working on building flying drones that can deliver packages directly to customers.
I thought that was maybe a bit far-fetched, but certainly interesting. However, the media grabbed onto the drone story and ran with it. All day Monday, every news channel I watched -- financial and otherwise -- was talking about Bezos, Amazon and drones.
Bezos certainly knows how to create a buzz. What has yet to be seen is whether he can generate profits for Amazon shareholders.
The American Family Association is asking shoppers to avoid the chain because the holiday isn't mentioned in advertising.
By Christopher Freeburn
A conservative group is asking consumers to avoid an electronics chain this holiday season because of an omission in its advertising.
According to the American Family Association, RadioShack (RSH) has dropped the word "Christmas" from its TV and newspaper ads, as well as in-store and online promotional materials. Instead, RadioShack is promoting "holiday" sales and deals.
The association criticizes RadioShack for “censoring the word Christmas” even as it tries to draw in people shopping for Christmas gifts. The group is calling on its members to boycott the retailer for one month and to contact RadioShack’s corporate offices to complain about the absence of Christmas in company promotions.
Is it possible to have yield and growth? With these picks, we say yes.
Dividend yield or dividend growth?
Investors are often asked to choose between these two types of yield plays, but it's not the right question to ask. Instead, you want to find stocks with fast-growing dividends that will eventually sport high yields.
But let's face it, so many companies in the S&P 500 were content to aggressively boost their dividends a few years back, and now seem to simply nudge the payout just a bit higher each year.
Indeed, the outlook for dividend growth in the S&P 500 is likely to be much more muted in coming years, with earnings-per-share (EPS) growth -- not rapidly rising payout ratios -- becoming the prime determinant.
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[BRIEFING.COM] The S&P 500 made a move back to its high for the day, but it received some pushback just above 1811 for the second time this session. In the process, it carved out what appears to be a technical line of resistance in the sand (or snow, if we're being seasonal) for today's participants.
On a related note, the first line of technical support comes in at 1801/1800, so there is still some cushion for the market based on its current standing before participants grow ... More
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