Sorry to do it to you, but one last post on Twitter in 2015. A few days ago, early TWTR shareholder, and quasi-activist tweeted this:
— Chris Sacca (@sacca) December 24, 2015
Regarding this tweet:
In a year in the U.S. public stock market where Alphabet (GOOGL) gained more than $200 billion in market cap, Amazon (AMZN) gained $150 billion, Facebook (FB) gained $100 billion, Netflix (NFLX) gained $30 billion, heck even eBay (EBAY) gained more than $5 billion its quite shocking how little value is being placed on TWTR’s growth prospects. I don’t make the comparisons above to suggest that TWTR has similar business models and growth attributes, but even in the private markets, SnapChat has a greater value, and Instagram and WhatsApp within Facebook are both valued at least double that of TWTR’s $13.5 billion enterprise value. Somehow TWTR has been lumped into with loser internet service companies like Pandora, Yelp and Zillow.
And back to the LinkedIn (LNKD) / TWTR comparison. LNKD is flat on the year, but down 17% from its 52 week and all time highs made in March. While the stock has outperformed TWTR by a long shot, which is down 37% on the year, very near all time lows, I would say that LNKD sentiment is also less than rosy relative to other high growth, high valuation internet stocks like the ones listed above who are driving most of the Nasdaq’s 6.5% year to date gains. Something has to give between these two stocks.
I know it’s never apples to apples when comparing growth and valuation metrics, and comparative valuation on expected sales growth is often a fools errand. But as I have mentioned before in this space, a decent pair for 2016 could be long TWTR and short Facebook dollar for dollar. And an even better pairs trade could be TWTR and LNKD.
The last point I would make is that while Sacca was very vocal about TWTR and the company’s opportunity, and how to get there in 2015, he has yet to see his bullish thesis play out. Just because the guy was rewarded as a successful early private investor in TWTR, Instagram and Uber, doesn’t mean that the public markets will be as generous. His blog post from June, What Twitter Can Be offers many of the answers for the company’s turnaround. But it may not offer the key for the turnaround in the stock anytime soon.
As the stock has threatened new lows, Sacca has been quiet, and I suspect when you are a multiple hundred millionaire or billionaire, time is not a luxury, it is a staple. He will be right eventually, but for you and me, we have to manage risk, which is why I have on many occasions in 2015 tweaked my bullish thesis when it was working in the first half of the year, and when it went horribly wrong in the back half.