Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Twitter: A Stock That Does Not Meet Its Business Expectations

By Stavros GeorgiadisStock MarketsAug 17, 2016 12:36PM ET
www.investing.com/analysis/twitter-a-stock-that-does-not-meet-its-business-expectations-200148512
Twitter: A Stock That Does Not Meet Its Business Expectations
By Stavros Georgiadis   |  Aug 17, 2016 12:36PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Will the stock market make a correction? If it does, then Twitter Inc (NYSE:TWTR) may be a good option to sell the stock or buy some put options.

Twitter is currently trading at $20.86 per share with 13.73 – 31.87 52 week range. What is wrong with this very promising micro-blogging and business idea and why does Twitter stock cannot meet its business, marketing and financial expectations? Judging a company by its stock performance is often interesting. Twitter has a very large audience like Facebook (NASDAQ:FB) but the main problem is that the twitter cannot fully take advantage of its members and make money with it. Net income for the last 3 years is negative, although it has a slight improvement diminishing losses.

Both profit margin and operating margin are negative and so does return on equity. Growth estimates of the company versus the industry are very promising but these are just estimates.
Personally I use and like Twitter a lot for marketing and business reasons. It is a great source of finding news and information, ideas for free. I have also been paid to promote posts. Obviously the company who paid me must have also made a profit. Where is the profit of Twitter?

There is something wrong with numbers. Looking at a 5 year period we can see a nice growth in sales/revenue .The same at gross income. But when all that matters is net income and profitability Twitter is not a good performer. Recently there is a focus on ads revenue from videos. Promising idea but what will be the results? About the technical analysis the stock is trading above its 50 period daily simple moving average which is bullish, and above the 200 daily simple average at 18.82. A bounce has already been made from the low price of 13.73 but is there momentum in that move? Soon in a few days we will have the quarterly results. Indications are that still EPS will be negative. Any negative EPS tell us one thing that the stock is purely bought from those who buy it based on growth expectations.
The competition from Facebook and other search engines is very intense as online advertising and internet marketing trend is expected to continue spending a lot of capital for promotion of online businesses. How much of the money will Twitter be able to capture? Social networks also as a trend will most likely persist. But competition from other big players like Instagram and Snapchat is also very intense. When there are so many options for a company to advertise the limitation of 140 characters per tweet seems a restrictive factor.

One main problem, an additional one that twitter has to face is that main US stock indices are now at very high prices. If a correction happens then stocks with not so great yearly performance like Twitter may face more selling pressure than other stocks with a better overall performance. And while a growth stock is expected to have a period of patience to deliver financial results the main question is mainly summarized to when will finally Twitter start having a profitability. Not just a one time event but a sustainable one. What Twitter really needs is an immediate and radical solution to turn its audience and user base to an attractive advertising and money making business. It has all the potential but numbers at least for now tell another story. Recently Twitter made a strong rally. But will it last or is it a nice opportunity to sell the stock?

Legal disclaimer : The writer does not have any Twitter stocks long or short and does not plan to trade Twitter for the next days.This is just analysis and not a trade recommendation.

Twitter: A Stock That Does Not Meet Its Business Expectations
 

Related Articles

Twitter: A Stock That Does Not Meet Its Business Expectations

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email