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Among the tech stocks that I follow, there are a few that I own as long-term positions (FB, AAPL), others that I'd never own (stocks like P, TZOO, etc.) and several others that I'd love to eventually own but am tracking some metrics and the pricing in order to determine the right time to get in. I've talked about my desire to buy stocks like TripAdvisor (NASDAQ:TRIP), LinkedIn (NYSE:LNKD) and Amazon (NASDAQ:AMZN) but things have not looked right. The same could probably be said about Twitter (NYSE:TWTR). Why?

I'm a big believer in its product, what it's trying to do and its potential. The fact that it's probably the app I use the most on my iPhone is also a reason of course and hopefully means I have a good understanding of the product's potential. I'm also currently listening to "Hatching Twitter" audiobook which also gives me a "founders'/management perspective." The big problem of course in buying Twitter stock from the very start has been its valuation which was well beyond what I was willing to pay for. Over the few months after the IPO, the stock got even more expensive before coming down closer to reality.

Is Now The Right Time To Buy?

First, I'll start off by saying a few of the reasons why I love Twitter as a company from an investor perspective:

-Established and "different" social player. There are many different social companies. Facebook is the leader of course but Twitter and LinkedIn are the other parts of the "big 3." Snapchat, Pinterest, Tumblr, Flickr, Google+ are also important players but I don't think anyone would question that both in the US and in terms of global presence, Twitter is a terrific player. It is also different from Facebook in a way that means they can and do co-exist. Yes, they both have gone at each other in many different ways, but overall they co-exist as they provide very different offerings.

-Advertising potential: There is no doubt that Twitter knows its users well. By knowing who they follow, what they read and what they write, it is able to get enough data to compete with every other player in terms of commanding very competitive rates.

-Incredible potential: You would have a hard time arguing that Twitter could not also reach a billion users. It connects users to friends and family but also to brands, services, celebrities, etc.

However, there are also elements I don't like:

-Slow growth: You'd think that given its much smaller user base, Twitter would be growing much faster yet it continues to lag. Part of it is the consistent problem of explaining to potential users what Twitter is and how to use it. It's very disappointing that after all these years, Twitter remains unable to explain this in a clear way.

-Beyond Twitter?: I see a hundred different things that Facebook could do to expand and Mark Zuckerberg continues to take his company down new roads successfully through acquisitions, new services, etc. Twitter on the other hand isn't so exciting from that perspective. I have trouble seeing Twitter becoming a platform for several other services or even becoming a viable ecosystem.

-User participation: Another issue that Twitter has been dealing with is the lack of user participation. Most users do not produce or upload any content to Twitter, they simply read.

Valuation

Of course, as is always the case, it comes down to valuations. I think Facebook is a great comparable, so I'll use that comparison:

First off, the main numbers:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueEarningsMkt CapRevenue/Share
TWTRTwitter Inc41.33N/A155.86-34.38109.793.284.988/15/201424.74B3.51
FBFacebook Inc66.2961.8136.2521.5954.694.636.537/23/2014170.53B3.25

Revenue growth is accelerating to some extent which is positive:

TWTR Revenue (Quarterly YoY Growth) Chart

TWTR Revenue (Quarterly YoY Growth) data by YCharts

Twitter remains a money-losing business but the arrow is clearly in the right direction here:

TWTR EPS Diluted (Quarterly) Chart

TWTR EPS Diluted (Quarterly) data by YCharts

In all honesty, I think I'm close to finding the valuation attractive enough. A combination of improving metrics and declining stock price has certainly helped TWTR become a better buy. I could see myself buying later this year, especially if we get a better sense of when TWTR will become profitable and what its plans for expansion (both its current service and future ones) will look like.

Disclosure: Long FB, AAPL

Source: Looking For An Entry Point For Twitter