What’s Behind Twitter’s Christmas Rally?

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Dec. 26 (Bloomberg) – Bloomberg’s Paul Sweeney, Julie Hyman and Adam Johnson discuss Twitter’s sudden rally and if it will continue with Trish Regan on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

I have a theory.

I have a area a lot of people out there want to be in the social networking space.

That means facebook and twitter.

Facebook is old and twitter is new.

That is probably some of it.

You are talking about sentiment.

We have been talking about twitter improving its mobile ad strategy.

So there is a fundamental basis underlying it.

But then you have the sentiment you are talking about with twitter achieving cult status, this move that does not have to do with fundamentals.

There is one interesting stock sage who weighed in recently on this, he tweeted about it.

He said had is a company have stock value of $41 billion?

The coming crash, he says, will be horrific.

Even analysts who were bullish have price targets below where it is right now.

It makes you scratch your head and say our people really going to get burned?

Matt drudge seems to think so.

This is a classic case of quarter and window dressing.

A lot of portfolio managers had this in their account from the ipo.

They probably need to make sure they have it so they can say we were big investors and twitter, one of the best ipo.

What is happening is that people are buying the stock, they are pushing their discounted cash flow models out many years to bring a discount back to today.

It is certainly pricing in growth over the next five or six years.

It is a steep valuation considering everything.

This thing is incredible.

Let me show you a few comparable valuations.

What we're talking about is cash flow.

The total stock market capitalization plus all of the bonds and then divide that by the cash flow.

Just another way of looking at value.

It is like price to earnings but there are no earnings.

Google, 12 times.

Facebook, 20 three times.

And now look at twitter.

301 times.

Talk about expensive.

It is off the charts.

If i were have done bar charts, these three would have been so low because the scale would be off.

Paul, i can remember in 2000 my mom would want to buy a particular stock because it was kind of like as cool as having the latest handbag.

Cmgi was one of them.

I was able to scoop it up.

I would say, mom, do the evaluation.

You wonder, is this the same thing where you have a lot of investors saying i need to be in this space.

I need to own this.

This is the hottest thing.

They are demanding it.

And also portfolio manager saying i have to have this because my investors are going to demand it so there is a race to get it.

I think that is partially the case.

One of the issues is some scarcity value.

If you are able on social media and you recognize one of the sources in growth is on social media, there are not too many ways to play it.

It is facebook, twitter, maybe linkedin.

It is a limited love stocks.

That might be a little bit of the scarcity issue driving the names up.

That said, look at what facebook has been able to do on the mobile advertising front.

Twitter trying to follow in those footsteps.

You think about video with mobility, and it is a very real possibility that this is the future.

This company does deserve this kind of valuation because there is that opportunity.

Yes, it is possible.

It is just a matter of showing the growth is potential -- the growth potential is going to become reality.

You can talk about the targets all the want.

To be fair valuations are meaningless to people why to buy the stock.

Eventually it is going to meet these growth targets.

The current valuations are meaningless to some extent.

Who thought that flicks -- netflix was worth what it was trading at?

Or that the going into 2014 it would have been the best performing stock this year.

Adam, i know you have a beautiful stock chart to show us.

If you're not afraid of heights.

Look at this thing.

The ipo in early november.

It was $40 for a long time.

Look what happened.

North of $70. practically doubled in just a

This text has been automatically generated. It may not be 100% accurate.


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