TWTR - Twitter, Inc.

[LC]

I wonder where Tweeter falls along the Capital markets line

[Guest wellmont]

for those that weren't around in 1999 this is the kind of stuff that would go on. in fact I am seeing more and more "late 90s" behavior. wild speculation. ipos that double on first day. ipo market is on fire. if the government cooperates by working out the budget by end of oct, the twitter IPO could be a watershed event that brings back the retail guy to speculate daily on "green". this is the end game to what zirp and QE is fostering. fed has one answer to everything. blow more bubbles.

[Palantir]

^You need some new mental models.

[Guest wellmont]

you obviously need "experience". the markets will oblige. :) you would think that there would exist some openness to a view from somebody who experienced 1999 directly as an investor. but I guess not. and that may be a sign in itself.

 

ps: you really do find it difficult to express yourself without making it personal....

[Palantir]

My post wasn't remotely offensive, by "you", I'm referring to many people who are saying the same thing. "You"'re trying to fit today's events into things that happened in the 90s and pretending they're the same. I hear logic like (I'm paraphrasing) "Markets are high and I feel smart so we're clearly in a bubble". Sigh.

[Guest wellmont]

hahaha hear that People? This wily "veteran" of multiple financial market cycles has emphatically stated with Certainty:

 

"It's Different This Time."

 

you heard it here first.

[rkbabang]

hahaha hear that People? This wily "veteran" of multiple financial market cycles has emphatically stated with Certainty:

 

"It's Different This Time."

 

you heard it here first.

 

I won't say it's different this time, but it isn't  1999, by a long shot.  I don't see companies trading at 600 p/e and everyone thinking they will go up forever.  I don't hear of people quitting their jobs to day trade.  etc... We are a long way from 1999.

[Guest valueInv]

for those that weren't around in 1999 this is the kind of stuff that would go on. in fact I am seeing more and more "late 90s" behavior. wild speculation. ipos that double on first day. ipo market is on fire. if the government cooperates by working out the budget by end of oct, the twitter IPO could be a watershed event that brings back the retail guy to speculate daily on "green". this is the end game to what zirp and QE is fostering. fed has one answer to everything. blow more bubbles.

 

Actually, many iPod tanked - FB, Groupon, Zynga, etc.

 

There have also been a large number of startups shutting their doors.

Further, there is a well known series A funding crunch.

 

Things were heating up last year but the FB ipo cooled that.

 

 

Your statement is one year too late. It is nothing like the 90s.

[Hielko]

hahaha hear that People? This wily "veteran" of multiple financial market cycles has emphatically stated with Certainty:

 

"It's Different This Time."

 

you heard it here first.

 

I won't say it's different this time, but it isn't  1999, by a long shot.  I don't see companies trading at 600 p/e and everyone thinking they will go up forever.  I don't hear of people quitting their jobs to day trade.  etc... We are a long way from 1999.

Totally agree. Sure markets are expensive and there are some richly valued tech IPO's, but at the same time the world is still struggling to come out of a recession and the memories from 2008/9 (or the FB IPO) are fresh. Not a recipe for widespread euphoria a la 1999.

 

Having said this I think the IPO of a company like Twitter offers a large potential for mispricing in the overvalued direction, simply because it has a strong brand name with consumers. As a result there are potentially a large amount of unsophisticated retail investors with interest in buying shares. I don't think that isn't the company you want to be in.

[Guest wellmont]

I won't say it's different this time, but it isn't  1999, by a long shot.  I don't see companies trading at 600 p/e and everyone thinking they will go up forever.  I don't hear of people quitting their jobs to day trade.  etc... We are a long way from 1999.

 

Let's try to be precise about what I said. I said two things about 1999. First, I said that I was investing (my money and opm) in 1999. Second, I said this particular incident, where reckless naive speculators drove up Tweeter 400% in a day because they thought they were buying Twitter (and then because it started to move a lot), reminded me of the the stuff that went on in 1999.

 

I did not say 2013 = 1999. I did say there was lots of "late 90s" stuff going on today. And I stand by that. I notice this stuff. Perhaps others have their heads down, buried in the S & P manual searching for micro cap net nets, and aren't seeing what I am. But it's out there.

 

As for expensive stocks, there is a growing list. I simply plugged the first name that came to mind, LNKD, into Marketwatch and sure enough, the trailing p/e ratio that displays is 662. That's just the first one off the top of my head.

 

But this is the Twitter thread, and I made a prediction. I said it Could be a watershed event. That implies something in "the future". It reported $300m+ in sales and makes no money yet. Expected valuation range is $15-$20B and may well be higher in the aftermarket. No earnings. That's no net net.

 

As for people quitting their day job, again let's be Precise about what I said. I admitted that the retail investor has yet to come back beyond moving money into equity mutual funds. But I did say that given the extremely easy money and ZIRP, speculators may come back in full force if they start to think easy money is being made in IPOs. And the twitter IPO has mass appeal. In fact IPOs are having their best year since the tech bubble with the IPO index up over 50% this year already.

 

And just so you know what's going on out there, in my radio market, there are commercials for flipping houses seminars, and day trading systems that can make you $1000 a day "with no risk", playing over and over throughout the day. House prices are almost back to where they were in 2006 where I live. Yes we are coming out of an awful recession. But the financial crisis was 5 and 6 years ago. People have short memories. And asset prices are inflating.

 

Bubbles don't pop on their own. They tend to just get larger. They have to be popped. Not only have we not raised rates above zero, we are still doing QE. This is the most reckless fed I have seen in my 28 years of investing my own money.

 

 

[Guest valueInv]

I won't say it's different this time, but it isn't  1999, by a long shot.  I don't see companies trading at 600 p/e and everyone thinking they will go up forever.  I don't hear of people quitting their jobs to day trade.  etc... We are a long way from 1999.

 

Let's try to be precise about what I said. I said two things about 1999. First, I said that I was investing (my money and opm) in 1999. Second, I said this particular incident, where reckless naive speculators drove up Tweeter 400% in a day because they thought they were buying Twitter (and then because it started to move a lot), reminded me of the the stuff that went on in 1999.

 

I did not say 2013 = 1999. I did say there was lots of "late 90s" stuff going on today. And I stand by that. I notice this stuff. Perhaps others have their heads down, buried in the S & P manual searching for micro cap net nets, and aren't seeing what I am. But it's out there.

 

As for expensive stocks, there is a growing list. I simply plugged the first name that came to mind, LNKD, into Marketwatch and sure enough, the trailing p/e ratio that displays is 662. That's just the first one off the top of my head.

 

But this is the Twitter thread, and I made a prediction. I said it Could be a watershed event. That implies something in "the future". It reported $300m+ in sales and makes no money yet. Expected valuation range is $15-$20B and may well be higher in the aftermarket. No earnings. That's no net net.

 

As for people quitting their day job, again let's be Precise about what I said. I admitted that the retail investor has yet to come back beyond moving money into equity mutual funds. But I did say that given the extremely easy money and ZIRP, speculators may come back in full force if they start to think easy money is being made in IPOs. And the twitter IPO has mass appeal. In fact IPOs are having their best year since the tech bubble with the IPO index up over 50% this year already.

 

And just so you know what's going on out there, in my radio market, there are commercials for flipping houses seminars, and day trading systems that can make you $1000 a day "with no risk", playing over and over throughout the day. House prices are almost back to where they were in 2006 where I live. Yes we are coming out of an awful recession. But the financial crisis was 5 and 6 years ago. People have short memories. And asset prices are inflating.

 

Bubbles don't pop on their own. They tend to just get larger. They have to be popped. Not only have we not raised rates above zero, we are still doing QE. This is the most reckless fed I have seen in my 28 years of investing my own money.

 

So you have no analysis on Twitter?

[Palantir]

I fully support the Fed action of keeping rates near zero, and I hope it continues for years. While stocks may look expensive you've hardly made a persuasive case for why this is a "bubble", for all you know the market could just pricing in high rates for future growth, much in the way itis doing for LinkedIn.

 

EDIT: btw, what P/E would you assign for LNKD?  This firm has pretty much doubled revenue every year, is very famous, and widely used, I think it only follows that it will have a high multiple.

[bmichaud]

Wellmont, the responses you are receiving are merely confirming what you are saying hahah. Love it!!

[Guest wellmont]

Wellmont, the responses you are receiving are merely confirming what you are saying hahah. Love it!!

 

;D

[indythinker85]

Always great post from Aswath Damodaran

 

PS would buy at 2x revenue maybe wouldnt touch at $6B (6x revenue, but) I am no expert. Cheers!

 

Twitter announces IPO: The Valuation http://aswathdamodaran.blogspot.com/2013/10/twitter-announces-ipo-valuation.html

[fareastwarriors]

http://dealbook.nytimes.com/2013/10/07/suntrust-analyst-explains-his-50-a-share-price-target-for-twitter/

 

 

SunTrust Analyst Explains His $50 a Share Price Target for Twitter

[stahleyp]

http://money.cnn.com/2013/10/08/investing/twtr-symbol/index.html?iid=HP_LN

 

This is kinda scary. It reminds me of the late 90s when stocks would shoot up when people confused the names/tickers.

[rpadebet]

Wellmont, the responses you are receiving are merely confirming what you are saying hahah. Love it!!

 

;D

 

Wellmont,

Agree with your analysis to some extent, but I only think we are on "that" path and not "there" yet. The main reason I think we are not going to get something like the 90's soon is because the retail investor has been burnt very badly over the last decade. The retail guys aren't going to come back soon  or even if they do, not in the same scale as the 90's. Memories tend to be short, but for getting a true bubble, usually you need a "new bunch of suckers" and that takes time.

 

That is not to say there won't be a bubble, ( I am pretty sure there will be one soon) but IMO bubbles don't usually happen where you look and expect them to happen.

 

Yes there are pockets of absurd valuation in the market ( but isn't this is true in all markets in either direction), but most of the overall market looks full to slightly over valued. Big sectors like banking, insurance, oil and gas, manufacturing, mature tech etc don't look expensive now.

 

Regarding IPO valuations, I think even during Ben Graham days these "new issues" were over valued and he cautioned against these in his books. So, I don't think we can glean too much about the market from Twitter valuation, except that we can be pretty sure it is going to be richly valued.

 

[APG12]

Always great post from Aswath Damodaran

 

PS would buy at 2x revenue maybe wouldnt touch at $6B (6x revenue, but) I am no expert. Cheers!

 

Twitter announces IPO: The Valuation http://aswathdamodaran.blogspot.com/2013/10/twitter-announces-ipo-valuation.html

 

This post really proves why Twitter is no place for value investors. Adjusting Aswath's growth rate down from 55% to 45% or up to 65% produces per share values ranging from $11.18-$26.69. A complex spreadsheet isn't necessary to show this but it makes the point perfectly. The growth rate is simply unknowable meaning the range of intrinsic values is extremely wide. I don't think that makes this a bad bet necessarily but it does make it inherently speculative in nature. Speculating can be fun but it's not investing.

[Mephistopheles]

http://online.wsj.com/news/articles/SB10001424052702304500404579127612907096616

 

No profits? No problem.

 

Investors are showing increasing hunger for initial public offerings of unprofitable technology companies and the potential for big gains that they bring.

 

Sixty-eight percent of U.S.-listed technology debuts this year, or 19 out of 28 deals, have been companies that lost money in the prior fiscal year or past 12 months, according to Jay Ritter , professor of finance at the University of Florida. That is the highest percentage since 2007, and 2001 before that.

[Guest valueInv]

Here is another company with no problem monetizing mobile:

 

http://www.bloomberg.com/news/2013-10-15/twitter-revenue-more-than-doubles-in-third-quarter.html

[fareastwarriors]

http://dealbook.nytimes.com/2013/10/24/twitter-said-to-be-close-to-unveiling-price-range-for-i-p-o/?ref=business

 

 

Twitter Unveils I.P.O. Price Range of $17 to $20 a Share

[bmichaud]

I must admit this article by Eric Jackson is intriguing.

 

http://www.forbes.com/sites/ericjackson/2013/10/04/will-no-dual-class-structure-create-a-bidding-war-for-twitter/

 

If Twitter is in fact "beachfront" tech property akin to Paypal or YouTube, then its rumored IPO valuation of $11B may be chump change.

 

Only in the world of tech of course....

[wachtwoord]

I must admit this article by Eric Jackson is intriguing.

 

http://www.forbes.com/sites/ericjackson/2013/10/04/will-no-dual-class-structure-create-a-bidding-war-for-twitter/

 

If Twitter is in fact "beachfront" tech property akin to Paypal or YouTube, then its rumored IPO valuation of $11B may be chump change.

 

Only in the world of tech of course....

 

They talk about a buy out being easy due to the absence of a dual-class share structure, but isn't Twitter only selling ~12.5% of itself? Won't the remainder stay with the founders who will not simply sell to any buy out offer?

[Palantir]

The guy is right, DCF, intrinsic value, and Ben Graham will not tell you how to value TWTR, but how much Steve, Tim, and Larry are willing to pay for it. 10-12B is nothing. I agree that a single class structure should cause it to trade at a premium.