It looks like Twitter has finally given Wall Street what it wanted: user growth. In the social media company's second-quarter earnings report, the company not only saw its revenue rising 124% year-over-year to $312 million, but it also added 16 million users, up from 255 million monthly active users in December-they may want to thank the World Cup for that.
The resulting furor was, I thought, a little too exuberant as shares were sent up 38% to $52.28 in after-hours trading before settling at $46.95. Today they are down 2% to $44.26.
So is this the real deal now? Or is it all premature again? Personally, I'm cautiously bullish on Twitter-meaning I believe in the company and its future, but I feel that even where it is now, it's still overvalued. On Wednesday, for example, Twitter shares were trading at about 200 times forward earnings against Facebook's 39.4 times. Right now, I just don't see it. Facebook has proven to be effective in growing its ad revenue and looks to be on a tear with its numbers from last quarter.
Twitter's results were good, and I believe that they were due for a little Wall Street love, but they certainly weren't good enough to warrant a 30% rise in the stock price. They were good enough for several analysts to change a "sell" rating to a "hold" rating, but I fear that the premium shares are trading at is setting them up for another hard fall.
It will especially be interesting to see how user growth looks this quarter as the World Cup excitement has died down. At this point, I'm not excited about where the stock price is now.