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'Things Are About to Get Very Interesting': Three Investing Experts on Twitter's Future

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Three of Minyanville's savviest tech writers discuss the much-hyped IPO and what the future holds for the world's latest publicly traded social media company.

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On September 12, 2013, Twitter (NYSE:TWTR) announced, on Twitter of course: "We've confidentially submitted an S-1 to the SEC for a planned IPO." Two months later, the company went public on the New York Stock Exchange (NYSE:NYX). Its stock climbed 73% above its offering price last Thursday, the first day of trading. Since its initial open around $46, the stock has declined 8.15%, but has still managed to avoid a large decline like the one Facebook (NASDAQ:FB) saw last year in its famously botched IPO. Below, three of Minyanville's most tech- and social media-savvy writers discuss the IPO and their take on the company going forward.

The Mirror Image of Facebook
By Michael Comeau


Twitter's IPO was brilliantly engineered to generate a big first-round pop without leaving any egg on the faces of the underwriters and the New York Stock Exchange. In other words, it achieved a mirror image of what happened with Facebook's coming-out party. The whole thing went off without a hitch.

But things are about to get very interesting with Twitter, because the valuation, and thus, expectations, are sky-high. That's not inherently a bad thing. Expensive stocks can get more expensive if the growth drivers are there. So come January, when Twitter delivers its first-quarter earnings report, it had better put up some spectacular numbers and give people a reason to believe for the long-term.
Look at what happened with Tesla (NASDAQ:TSLA), one of this era's flagship momentum stocks. One so-so quarter and the stock got clobbered, even before the recent fire incidents.
Don't think it can't happen with Twitter, too.

Michael Comeau edits Minyanville's Buzz & Banter and is also a regular columnist on Minyanville.com, focusing on technology and consumer stocks. Read more of his work for Minyanville, here.

The Price of a Unicorn
By André Mouton

How much is a unicorn worth? It's hard to say. We know that Twitter the Social Network is pretty important, but we can only guess at the value of Twitter the Business. It doesn't yet exist. What might the company's revenue potential be, in a world where Facebook, LinkedIn (NYSE:LNKD), Google (NASDAQ:GOOG), and so many others are competing for the same advertising market? How will it fare at monetization, given the idiosyncrasies of the network and its users? When will profitability come, and what will it look like, once social media has lost that new-car smell?

What Twitter's public offering does show us is that, to find success in this day and age, you have to appear not to want it. Twitter downplayed its IPO -- and got a smash success. Facebook's eagerness, on the other hand, earned it a slap in the face. Amazon (NASDAQ:AMZN) won over investors by telling them to go to hell; Elon Musk took a place in the modern zeitgeist by appealing to ideals over pragmatism. Twenty-somethings are abandoning the corporate ladders of Wall Street, growing mustachios, and moving to Brooklyn. Entrepreneurs talk about "disruption" in the same tone that activists discuss "change," and if the status quo gets mentioned at all, it's as a four-letter word. More evidence -- if we needed it -- that social mood drives markets.

André Mouton is an independent investor who cut his teeth in the dot-com crash and chewed his lip in the financial crisis. He is a former writer for Offbeat Magazine in New Orleans and a touring (but not itinerant) musician, who now lives in New York. Read more of his work for Minyanville, here.

Following the Early Path of Google
By Sean Udall


There is so much to say on Twitter, and one tidbit has already been telegraphed. The trading in this name is going to be highly volatile and offer plenty of ammo for both the bulls and the bears. I'm an "on the record" bull and have been for some time. In fact, I've been writing since the LinkedIn IPO, if not earlier, that I felt Twitter will eventually become the most valuable of all the social media companies -- including Facebook.
I'll also note that while the world was freaking out over Facebook crashing into the mid to low $20s and even the high teens, I was a table-pounding buyer of the stock. As much as I liked Facebook in the low/mid $20s, I would like Twitter even more starting around $35 and anything below. Will it ever trade that low? I doubt it.
So let's sum Twitter up with some Q&A:
1. Is Twitter expensive? Very.
2. Did it go up too much on the first day? Probably.
3. Has it maxed out? No way!
4. Will it be the most valuable social media stock? I firmly believe so.
5. Will it suck the market cap from many other Web 2.0 stocks, such as Yelp (NYSE:YELP), LinkedIn, Zillow (NASDAQ:Z), Angie's List (NASDAQ:ANGI), and even Facebook? Again, I fully believe so.
6. Is Twitter a threat to Facebook? This one is harder to answer, but I'd say yes at the margin. Facebook is strong and diverse enough to stand on its own, but growth money will flow from Facebook to Twitter over time.
7. Is Twitter a one-trick revenue pony? Not at all. In fact, I see Twitter having at least five distinct revenue streams and maybe as many as 10. However, to me, one of the key drivers to the company's future upside lies in eventual monetization of its Big Data analysis pipe. This could be the company's second-biggest revenue driver and also carry the highest gross margins. In my view, Twitter feeds Big Data analysis in more verticals and with richer information than any other social media company.
Bottom line, I think Twitter has a very promising outlook. The stock will likely trade in crazy spike-and-gap moves in both directions for a while. But I also think it will follow the early path of Google. And for Google, once it reported its second quarter as a public company, all thoughts of the stock trading far too richly completely went away.

Sean Udall is an investment strategist, portfolio manager, and proprietary trader with extensive experience across a wide variety of asset classes, including equities, fixed income, currencies, and derivatives. He's a recognized trader, prolific writer, and the founder of the TechStrat Report, a technology-focused investment newsletter from Minyanville. Read more of Sean's commentary, here.
Udall has positions in Facebook and Twitter.

Follow me on Twitter: @JoshWolonick and @Minyanville
No positions in stocks mentioned.
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