Investors should pass on Twitter for now
The microblogging site comes up short compared with larger rival Facebook.
If investors went by the traditional measure of stock’s worth, which is a company's earnings, the answer would be an easy "no." Twitter, which is based in San Francisco, lost more than $68 million in the six months ended June 30. Growth is also slowing, another huge red flag for investors.
The microblogging site had 218 million monthly users as of June, up 44% from last year. While that sounds impressive, it’s below last year’s 78% gain. Twitter expects its revenue growth to slow in the future as user growth declines. It wasn’t more specific.
The company’s accumulated deficit of more than $418 million is another cause for concern, as are its mushrooming costs. For instance, as of June 30, Twitter had about 2,000 employees, a gain of more than 1,800 since January 2010.
Investors may also find its earnings power lacking compared with rival Facebook (FB).
That social network earns an average of $1.60 in revenue for each of its 1.1 billion monthly active users, exceeding Twitter’s average of 64 cents per user. Facebook also is profitable and exceeded analysts’ expectations in the last quarter. Facebook shares have also been on fire, more than doubling in the last three months.
Not surprisingly, Twitter is heavily dependent on advertising, which is responsible for more than 80% of its annual revenue. Though some may argue that Twitter is a "one-trick pony," naysayers have said the same thing about Google and the search engine giant seems to be doing just fine.
Getting back to valuation, by Twitter’s logic it's worth more than Macy's (M), Burger King (BKW) and The New York Times (NYT) combined. Although all of those venerable companies face plenty of challenges, they are nonetheless profitable. So how is Twitter more valuable? At first blush, it doesn't make much sense. But stock markets, though, run on faith more than logic.
But even if you think that Twitter’s potential is limitless, the time isn’t right to buy this stock given the huge hype around the IPO. It’s not clear whether the right time will be in a week, a month or a year.
Until that day arrives, people should tweet to their heart’s content and see how the company responds to the many challenges it faces.
And that's Killer Companies.
More from Top Stocks
I don't understand the Facebook craze this is nothing more then Myspace..
You all left Myspace because of the ads but Facebook is more of an ad base then Myspace ever was but yet you all cling to it like it was your life.
Let go step outside go see your family instead of Facebooking..
Soon there will no need for life....
The only people who should buy Twitter are people who want to make money.It will
be a moonshot.
In less than 6 weeks...The "stated value" of the New IPO has jumped 50% from $1 Billion to $1.5 Billion and that to me, is enough warning "right up front."
Even if I can or could get shares, it's a pass for us...
I'm not going fatten any more pockets of millionaires and a couple billionaires..
Pump and dump until your heart's content.
On the day of the IPO in November?
I wonder how many "astute investors" will be buying TWTRQ instead of TWTR....??
That will be a hoot....
Didn't think they usually come out with the listing symbol, this early before an IPO??
If TWTRQ is worth $0.15 as some buyers seemed to think last Friday, then TWTR could easily be worth a trillion dollars. It’s all relative you see in the land of infinite money printing, where the magicians on Wall Street pull $10,000,000,000 rabbits out of $10,000,000,000 hats every day.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Like many companies this winter, the fast-food giant blamed a drop in same-store sales on the weather. But could its problems be bigger than a snowbank?
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.