Twitter, Inc (TWTR)

From a valuation perspective, this is not something he would look at. They are slowing down. There are more people, but their revenue is going to be slowing down. Getting advertising is much harder. With all these things, they get to a certain level and start to deteriorate. Trading at a very high valuation, so there is risk. When companies like this miss, even slightly, it destroys their stock.

When looking at the social media space, a lot of them are trading at pretty lofty valuations. He tends to stay away from these types of names. The one name that stands out that is a bit cheaper in terms of its growth profile relative to its PE is Facebook (FB-Q), and is making money and moving forward.

This company has a real opportunity to monetize the traffic that they have. All the evidence would point towards the fact that they are going to do that. It will be a higher volatility stock. You could own an ETF (SOCL-T) that owns this. Thinks this company has a pretty good opportunity.

This is a stock where there is a lot of speculation. You have good growth in users and a lot of that is reflected in the valuation. They haven’t actually made money yet. She prefers more established companies where they are going through a temporary challenge. This is not a stock that she would even look at. If you own, consider taking money off the table.

A good entry point for this would be when they start making some money. They have a long ways to go to profitability. Too rich a multiple for him.

The problem with this and other social media stocks is that they are being priced for earnings down the road, not for earnings today, even with a setback that this stock has had. These are trading heavily on sentiment and expectations. These are gamblers’ stocks. Very hard companies to analyze.

Twitter (TWTR-N) or Facebook (FB-Q)? All of these properties have not really demonstrated how to make sustainable money. Feels that Facebook will ultimately be acquired by someone and will have to come up with an engine of sustainable growth. This one has value. It’s a community, but how do you monetize a community? This is not a long-term hold. Here today and gone tomorrow.

Twitter (TWTR-N) or Facebook (FB-N)? Feels the social media names, including this one, have stretched valuations. It’s such a new phenomenon; it is hard to tell where the earnings are going to come and how they are going to monetize things. Facebook is in the 3^rd inning where this one is only in the 1^st inning. Neither of these fit the profile of his portfolios.

Not interested in buying it here. Hit pretty hard today.

A new phenomenon. Today it is pretty expense based on earnings. PE of 493. Stay away until you see earnings come out on this one. He hasn’t owned any of the names in the social media space, but thinks facebook would be better at this point.

A leader in their field. Great, long term business. A lot of companies in the social media space have had huge runs in the last several years. On these, be careful and watch what you are paying.

Not the kind of stock that he would buy. A risk in owning a high growth stock is that they attract a very flighty investor audience such as hedge funds and other momentum traders. The stock can continue to do well, as long as it beats earnings expectations by a huge number. As soon as it fails to do so, all of the hedge funds and momentum traders head for the exits.

His model price is $5.37 because it doesn’t have any earnings yet.

Shares were not allowed to be sold until today and something like over 400 million are coming out of lockup. Of that, shareholders have indicated they are not prepared to sell about 200 million as they feel there is more value in the company. This could be an overhang that potentially there could be a selloff in a few weeks/months. Just reported very strong user growth, but not as high as the market expected and the shares pulled back. Still trading above the IPO price. Prefers value stocks and this is very momentum driven right now.

He thinks that over the last few months, where we have seen momentum stocks really get hurt badly from a price standpoint, points to the reason why he doesn’t own them i.e. the values are so difficult to peg. What is the worth of a Twitter or a Facebook (FB-Q)? If they turned into a Google (GOOG-Q) then the price is going to react very positively and you will do well. But a lot of the time these types of stocks build in future expectations, as all stocks do but expectations are extreme and really have to grow into the fundamentals in a very impressive way. When the market loses confidence, they take a haircut of sometimes 30%-40%. These are speculations and his business is not to speculate, but to take as much solid information as he can and then put together a business plan that has the highest likelihood of success on behalf of his clients.