Question

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"Twitter annoUnced Thursday, that it plans to price its initial public offering somewhere between $17 and $20 per share, aiming to raise as much as $1.3 billion. That would make Twitter worth about $12 billion. While initial analyses called it a conservative valuation, others are starting to call the Twitter IPO overhyped and overvalued.

Analysts point to the Facebook Inc. (NASDAQ:FB) IPO, which valued the company at $127 billion, as evidence that Twitter’s valuation is conservative. Brian Hamilton, chairman of Sageworks, a financial analysis company, said this isn’t a good way to look at it. Instead, it’s more accurate to look at a company’s relative value than its stock price.

Facebook’s IPO valuation was 22 times trailing sales, but Twitter’s proposed valuation is actually 31 times its trailing sales. To make matters worse for the Twitter IPO, Twitter loses money and has never been a profitable company. At the time of Facebook's IPO, the company was already a profit powerhouse.

“[Twitter is] probably a good company; it’s got good revenue and some good metrics,” Hamilton told IBTimes in an email. “But to date, the market hasn’t validated the company in the sense that expenses are still more than revenues. For every dollar they’re generating, they’re losing a quarter, based on the last full year’s results.”

Apple’s valuation was 10 times sales at the time of its IPO, and Microsoft’s was four times. Unlike Twitter, both of these companies were also turning a profit at the time of their IPO.

Proponents of the Twitter IPO argue that Twitter is a positive outlier in a bullish tech market. Hamilton said that ignoring things like quality of revenue and earnings to simply invest in line with market trends is a dangerous mentality that has proven flawed in the past.

Twitter is trying to do everything it can to avoid the problems that plagued the Facebook IPO last year. Twitter even ran an IPO simulation on the New York Stock Exchange on Saturday to look for glitches. It was the first time the NYSE performed a test IPO.

Twitter is expected to make its debut on the NYSE on Nov. 7 under the symbol TWTR."

Question

Please check online resource of Twitter also thinking about  the publicity surrounding Twitter as a groundbreaking social media tool is justified or is it a result of a competitive media hungry for a story. Do you think social media tools that do not manufacture traditional physical products can be easily or fairly valued based on traditional financial models and statements? how you feel the valuation/stock price of Twitter feels right, too high or too low? Would you have bought Twitter shares at $15-$20 each?

Do you think it would play out the same way today, as it did back in 2013? Answer questions more than 300 words

Answer 1

Looking at Statistics,Twitter says that 1.6 billion unique visitors per month see tweets on third-party properties, which corresponds to 500 million tweets per day and around 200 billion tweets per year. With such widespread reach it is valid to think of Twitter as a realistic and useful way to build businesses and get instant public messages delivered to the hands of the target audience which may include work colleagues, existing customers or potential customers.

Twitter as a Social Media Tool-

Whether you are engaged on Twitter or not, someone may be tweeting about you, your company, your team, or your industry. Twitter provides a search engine that allows you to enter company names, brand names, topics, and personal names. Another important research area is your competitor's audience. You can use an app such as Twitonomy to enter a user's name and view detailed information about them, their tweets and their followers. Your competitor's audience might be full of new, relevant followers for you to connect with.

Your Own Media Outlet

In case a business has not engaged a big Personal Relations firm, it can use Twitter to post news or updates about company or products. One rule of thumb is to never post anything negative. The other rule of thumb (to avoid posting anything negative) is to never post when you're angry.

Visit the twitter feeds of your competition before taking the plunge so you're well-versed in what people are posting. You'll notice that certain people (those who serve as the "voice" for their business) share not just information about themselves and their company, but links to other videos and relevant news stories.

Twitter for Building a Brand

Twitter is a very useful tool in giving your brand a voice and a personality. If you follow the Twitter feed of Suzy Welch (author, news correspondent, and wife of Jack Welch) you'll see that her tweets are friendly, upbeat, personal, and often have photos of Suzy hanging out in her kitchen.

This is not to diminish the quality and importance of the messages she delivers to her audience, she just puts forth her unique and engaging personality. Being likable online makes all the difference and can increase your Twitter following and help you grow your business.

Deliver Information and Provide Customer Service

People want to be informed but they don't want to read ten magazines and watch ten news shows to get the information they need. So, be sure you provide your followers with value-added material, whether it's sharing news articles, delivering bite-size nuggets of advice, or links to videos.

As you collect larger numbers of followers, tailor your marketing campaigns and related tweets to this group. These people chose to follow your Twitter business account, so they're practically already qualified leads for you to appeal to.

And remember, Twitter is about information, conversation, and customer service. It's about talking to your prospects and consumers and interacting with them. Be sure to stay involved with your audience and reply to their messages as often as possible.

Coming to TWTR IPO:-

Given its widespread usage, Twitter has been emerging as key social media platforms having a wide reach all around the globe. Its ever increasing user bas thereby causing more participation and more revenue is an indication of growth the company targets in future. However amid its ever increasing glory, the greatest threats to Twitter involve instances that could lead to this “Google+ of Twitter” actually succeeding. TWTR faces less severe but potentially impactful political headaches.

Allegations of bias against conservatives still plague the company. Since political discussion plays an important role in Twitter’s audience engagement, alienating half of the political spectrum could potentially lead to a mass exodus from the site. Recently it was also known that Fox News has stopped using the Twitter..

Twitter’s Lagging user Base is also an area of concern for the company. Aside from politics, Twitter also needs to resume the growth of its user base. Its monthly active user (MAU) count in the U.S. has remained between 67 million and 69 million for more than two years.

The global MAU count of 326 million in the third quarter represented its second straight decline in MAUs.

Despite stagnant user growth, advertising and data licensing increased revenues by more than 25% in the most recent quarter. This has boosted Twitter in the last few months. However, long-term Twitter will need MAU growth to drive higher revenues.

Still, I expect TWTR will choose engagement over politics. Also, as Twitter enhances its abilities to drive revenue, its stock should see the benefits.

Final Thoughts on Twitter Stock

The multiple and the profit growth of Twitter indicates that TWTR could finally begin to fly. This fall, Twitter stock has risen as arch-rival Facebook and most tech companies such their stocks fell. As a result, TWTR supports a relatively low PE ratio considering its 40+% predicted long-term growth rate.

Despite these projections, Twitter has faced some level of political controversy. Also, its stagnant MAU growth could bring troubles later.

However, with massive revenue growth and continued improvements to monetize the site, Twitter stock holds a great deal of potential to return to and perhaps surpass its all-time highs. Given the opportunity to purchase TWTR for $15-20, I would had surely looked forward to invest with the stock.