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How High Could Twitter Stock Go?
Twitter, Inc. (NYSE:TWTR) is an American communications company based in San Francisco that operates the social networking and microblogging service Twitter. It previously operated the Vine short video app and the Periscope livestreaming service. The stock is currently trading at an impressive premium over Facebook. Elon Musk is reportedly considering a takeover bid for Twitter. If he succeeds, Twitter stock could soar.
Elon Musk’s bid to take over Twitter
After Musk’s recent announcement that he would buy Twitter, employees are scrambling for answers. The lack of communication from Twitter’s management is frustrating. Some went as far as to ask Musk and Twitter chief executive Parag Agrawal questions on Twitter. Others have turned to Charles Schwab. What’s the most likely outcome? Read on to learn more. This article is based on anonymous sources.
Musk has bought a substantial stake in Twitter, which he plans to take private. The billionaire had previously been invited to join Twitter’s board of directors. However, he declined the offer. On April 4, Musk reported that he had a 9. To see also : How to Reactivate a Suspended Twitter Account.1% stake in the company. He had also been in talks with the leadership of Twitter for a board seat, but declined the offer. Musk revealed his financial details and the company reversed its stance.
Company’s profitability
If Twitter has a good future, then it could trade at around 40 times its ‘hypothetical’ earnings. That would be a good multiple for a company in a fast-growing tech industry with likely margin expansion over the next decade. Read also : How Can I Learn to Use Twitter?. If that’s the case, Twitter’s stock price could reach $28 billion. However, that price is unrealistic given the company’s recent lack of profit.
In recent years, Twitter has become a lightning rod for controversy. Some users spread misinformation and toxic content, and former President Donald J. Trump was banned from Twitter after a Capitol riot. The company has been forced to adjust its policies on the fly in order to avoid controversy and censorship, and its business model has come under scrutiny. Twitter has also struggled to attract new users and retain current ones. While Twitter has been profitable in the past, it has struggled to maintain high usage and profits, and has failed to turn a profit in eight years.
Market-implied outlook
The market-implied outlook for Twitter stock is an estimate of the stock’s expected price change over the next twelve months. The market-implied outlook represents the consensus opinion of analysts and investors. This view reflects the current price of TWTR, but may not be a good representation of the fundamentals of the stock. Read also : How Can I Get My Twitter Account Back?. Because of its high valuation and wide spread of analyst price targets, it may be worth discounting. Seeking Alpha discounted the Wall Street consensus in its previous analysis of TWTR versus the S&P 500.
The underlying fundamentals of the company’s growth have remained positive. In its latest earnings release, Twitter reiterated its long-term target of 315 million monthly active users (mDAUs) by the end of fiscal 2023. The company expects to generate $7.5 billion in annual revenues by this time, up from $5.8 billion in revenue last year. However, this growth rate is lower than the company’s expected revenue growth in FY2023, excluding the sale of MoPub to AppLovin.
Valuation premium over FB
The valuation premium of Twitter stock over Facebook is a skewed measure of the potential growth of the two companies. While Facebook’s revenue grew by more than 40% year over year and its share price increased by over 19%, Twitter shares increased by less than half that amount. This difference is reflected in the price to sales ratio, which is one of the most widely used metrics in valuation. The P/S ratio of Facebook is 19 versus 8.5 for Twitter.
While Facebook and Twitter both enjoy high valuations, the latter is going public at a time when investors are looking to make money. According to one analyst, Twitter could end up looking cheap, especially if it is acquired by a large company such as Amazon. But some analysts question whether the optimism is warranted. The company has 150 million shares that could be created, adding another $3 billion to its valuation.
Potential downside for TWTR
There are a few reasons why investors may want to avoid Twitter stock. While the stock is massively unpopular, 75% of analysts are bearish about its prospects. Twitter is one of the most undervalued stocks among online advertising and social media companies. Yet the company is a bargain, and Jeff Miller’s latest 48-page report offers a contrarian viewpoint. There is substantial hard evidence that the stock could turn around soon.
One of the most significant reasons why Twitter stock is cheap is that the company remains unprofitable. The cost of revenue for the last quarter rose more than 12%, and the monthly active user count has flatlined. Meanwhile, Twitter’s most valuable segment of users remains stagnant at around 67 million. The market will be cautious about Twitter stock until it proves its management’s ability to turn it around. While Twitter is a bargain today, the company is risky for investors in the future.
