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Twitter had a Q1 revenue of $436 million. Doesn't it make it a $X0 billion business or am I missing something ? The main concern to investors is primarily the

by hatred 11y ago

Twitter had a Q1 revenue of $436 million. Doesn't it make it a $X0 billion business or am I missing something ? The main concern to investors is primarily the growth and their ability to warrant a premium price on the stock.

scandinavian 11y ago
Twitter is huge, it costs a lot of money to run. They had a net profit of negative $162.4 million Q1. I don't know what defines an $X0 billion business, but I would imagine that it would be profit.
- biot 11y ago
  Put simply, future value. Otherwise a sidewalk lemonade stand profiting 1 cent per glass would be far more valuable than a lemonade manufacturing business which sells millions of bottles a day and pumps all the profits plus additional investment money into manufacturing facilities. At some point, the money-losing lemonade manufacturer no longer needs to ramp up their facilities, they pay down the equipment cost, and generate boatloads of profit. That or they get bought out by a larger player who wants to enter the lemonade market but doesn't want to reinvent the wheel.
  - swingbridge 11y ago
    Of course, but at some point the whole "future value" logic runs flat. The market is losing faith in TWTTR's ability to generate value.
- criddell 11y ago
  What are they spending almost $200 million on each month?
JumpCrisscross 11y ago
> Twitter had a Q1 revenue of $436 million They're also consistently losing money. Even if you strip out half their capital expenditure or 3/4 of their R&D from their FY 2014 numbers, they would still lose money. Let's say they can eventually run a 20% net income margin. This would turn their 2014 revenues into $280MM of earnings. Using the S&P 500's 21x P/E ratio, this values the business at $6bn. That's 70% less than their current market cap. And they don't appear close to running a positive margin, let alone 20%, on their 2014 numbers.
- adventured 11y ago
  Twitter could be very profitable. They're running the business extraordinarily poorly. They have 36% of the head count of Facebook, with 12% the revenue. They're at $1.77b in sales the last four quarters. At the clip they're growing sales, they could certainly get to $3.5 billion in two years. If they ran the business properly, instead of pretending they're Facebook, they could generate $700 to $800 million in profit (purely in my opinion) two years from now. They'd get a rich valuation (Facebook is currently 90 times earnings); even half the valuation of Facebook would get them to $30 billion in market value two years from now, backed with real earnings.
code4tee 11y ago
Businesses are usually valued on reasonable (e.g. 12-18x) multiples of their profit (and by that it's their actual profit not these silly non-GAAP 'profit if you ignore all this stuff we don't want you to look at' profit nonsense). Tech companies often try to pretend this isn't reality, but after you've been trading on the public markets for a while reality starts to set in hard. So for Twitter to be a legit business valued at $18.5 billion (as it is today) they need to consistently churn out around $1.5 billion a year in pure hard core profit. They are nowhere near that and there's no sign of how they will get there. Hence all the negative pressure on the stock. When you bring it back to fundamentals that's the issue here.
- dlubarov 11y ago
  12-18 is a reasonable P/E range by historical standards, but not in the present environment. S&P 500's overall P/E is over 20 right now.
  - swingbridge 11y ago
    Fine, take 20-30. Twitter is still light years off those numbers.
roymurdock 11y ago
What do you think of the underlying business model that is generating this $436m in revenue? Do you think the current model of <insert thinly disguised promotional content that no one ever clicks on> is a sustainable way to grow revenues? How about the idea of charging superusers (top 1% of tweeters) a yearly subscription to use Twitter? All this tells me is that a lot of companies are willing to throw advertising budgets into the black hole of social media with no possible way of accurately measuring ROI.

by hatred 11y ago

scandinavian 11y ago

Twitter is huge, it costs a lot of money to run. They had a net profit of negative $162.4 million Q1. I don't know what defines an $X0 billion business, but I would imagine that it would be profit.

biot 11y ago
Put simply, future value. Otherwise a sidewalk lemonade stand profiting 1 cent per glass would be far more valuable than a lemonade manufacturing business which sells millions of bottles a day and pumps all the profits plus additional investment money into manufacturing facilities. At some point, the money-losing lemonade manufacturer no longer needs to ramp up their facilities, they pay down the equipment cost, and generate boatloads of profit. That or they get bought out by a larger player who wants to enter the lemonade market but doesn't want to reinvent the wheel.
- swingbridge 11y ago
  Of course, but at some point the whole "future value" logic runs flat. The market is losing faith in TWTTR's ability to generate value.
criddell 11y ago
What are they spending almost $200 million on each month?

JumpCrisscross 11y ago

> Twitter had a Q1 revenue of $436 million They're also consistently losing money. Even if you strip out half their capital expenditure or 3/4 of their R&D from their FY 2014 numbers, they would still lose money. Let's say they can eventually run a 20% net income margin. This would turn their 2014 revenues into $280MM of earnings. Using the S&P 500's 21x P/E ratio, this values the business at $6bn. That's 70% less than their current market cap. And they don't appear close to running a positive margin, let alone 20%, on their 2014 numbers.

adventured 11y ago
Twitter could be very profitable. They're running the business extraordinarily poorly. They have 36% of the head count of Facebook, with 12% the revenue. They're at $1.77b in sales the last four quarters. At the clip they're growing sales, they could certainly get to $3.5 billion in two years. If they ran the business properly, instead of pretending they're Facebook, they could generate $700 to $800 million in profit (purely in my opinion) two years from now. They'd get a rich valuation (Facebook is currently 90 times earnings); even half the valuation of Facebook would get them to $30 billion in market value two years from now, backed with real earnings.

code4tee 11y ago

Businesses are usually valued on reasonable (e.g. 12-18x) multiples of their profit (and by that it's their actual profit not these silly non-GAAP 'profit if you ignore all this stuff we don't want you to look at' profit nonsense). Tech companies often try to pretend this isn't reality, but after you've been trading on the public markets for a while reality starts to set in hard. So for Twitter to be a legit business valued at $18.5 billion (as it is today) they need to consistently churn out around $1.5 billion a year in pure hard core profit. They are nowhere near that and there's no sign of how they will get there. Hence all the negative pressure on the stock. When you bring it back to fundamentals that's the issue here.

dlubarov 11y ago
12-18 is a reasonable P/E range by historical standards, but not in the present environment. S&P 500's overall P/E is over 20 right now.
- swingbridge 11y ago
  Fine, take 20-30. Twitter is still light years off those numbers.

roymurdock 11y ago

What do you think of the underlying business model that is generating this $436m in revenue? Do you think the current model of <insert thinly disguised promotional content that no one ever clicks on> is a sustainable way to grow revenues? How about the idea of charging superusers (top 1% of tweeters) a yearly subscription to use Twitter? All this tells me is that a lot of companies are willing to throw advertising budgets into the black hole of social media with no possible way of accurately measuring ROI.