Facebook, Twitter: Is it Better to Buy Both?

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Oct. 7 (Bloomberg) -- Pivotal Research Group's Brian Wieser, KeeneOnTheMarket.com's Jim Ramelli and Bloomberg's Cory Johnson discuss Twitter's valuation and their outlook for Facebook with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Pre-or he $20 billion, 7 billion north of where it is currently being valued?

I don't know if the market is going to support that or not, but i'm a fundamental basis, you have a company with rapidly rowing revenue and a ton of losses.

If the comparison group is is there too much of this in my portfolio, i guess that depends on what your portfolio is.

When you look at it in terms of users, you could look across the universe of social media and see where linkedin is with its monthly visitors or twitter's monthly users.

Facebook with a ton more.

Fundamentally, there's a tremendous move and the world of advertising away from print magazines or general interest or soap opera advertising toward digital media.

A lot of that is indeed moving to face book.

You either believe it or not.

The ladies businesses are different are not because they are online.

Check out this thing we've got right now that shows you the year over year change in the cost per click or in the case for yahoo!, the cost for ads.

What that is really showing you is that twitter has added a ton of inventory and their ad rates have fallen quite a bit.

Their business model is still evolving and you could look at that one of two ways.

Maybe they have a lot more real estate to sell or their prices are falling dramatically because so much more real estate has come online.

That's creating both opportunity and risk that not as true with other companies.

You downgraded facebook last week to hold from buy.

What was your reasoning?

We had a price target and the market beat it.

So in that sense, it is overvalued.

We have been aggressive and optimistic, certainly ahead of the second quarter, but we see the stock moving up my 10 % or 20 %. the market is out of whack with reality on this one.

That was the basis of a downgrade.

What about the instagram revenue?

There will be tens of millions and eventually hundreds of millions and that might be indistinguishable from the revenue group they are already getting.

So it is baked in in your view?


When you look at facebook and compare it with twitter and we are asking the question of whether you should have one or the other, do you see more opportunity for upside in twitter?

Less dimensional i said.

We just launched a valuation on twitter today, so we are pretty comfortable with that.

The stock prices to be determined.

But let's put the context straight.

Google does $50 billion revenue.

The does 5 billion.

Twitter doesn't 500. round numbers.

There's a big opportunity between facebook and google and both of them are attacking the market twitter dominates.

You could say there's no reason to have one or both.

There's a bigger market they are all attacking.

It's not even google, is the legacy display business.

That is where the money is coming from.

Would you buy into the twitter ipo?

We are looking at it and it's very sad right now.

While link been at facebook trade at .5, it does look kind of expensive, but facebook has more room to run.

It's a momentum stock.

The stock has found buyers since then.

I want to have a relatively short timeframe because i think people will begin to sell and the ipo hits to make room for twitter.

They call spread for $.70, i can risk $70 to make $180 by the november expiration.

It's a great return on my money.

I'm curious to have you weigh in on this.

You could see this stock suffer when twitter comes out with its ipo because people will do a rotation.

As we compare one or the other, do you think facebook is going to suffer?

I don't think twitter is big enough to make that big of a dent.

I would point to google as being more at risk.

Think of the market cap.

Google is going to face a lot of margin erosion going forward area google and perhaps a tough spot, cory?

That is assuming the market doesn't continue to grow.

We have seen it dramatically on facebook's numbers where their market got so much bigger area google is going to that that advertisers are starting to figure it out.

Advertisers are trying to figure out what kind of creative message works.

I don't think it's clear that it is a zero-sum game.

The other thing we know is that advertising is the canary in the coal mine.

The first thing the company is cut when they fear problems are head is advertising.

Even before any capital expenditures, advertising is the thing that's cut.

When we talk about policy in washington, debt, default and so on, we have to keep in mind the first thing corporate america will start spending on his advertising.

That is a good point.

Cory johnson, brian weaver, and gem remotely.

Built ford tough.

The company is celebrating the anniversary of the december line.

We have an exclusive and rare interview with henry ford o grandson.

Plus, two charts, one message.

We will not default.

Chart attack with jim b on go is next.


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