Twitter’s Ballooning Market Cap; Twitter: The Christmas Cult Stock

December 27, 2013 Leave a comment

Dec 26, 2013

Twitter’s Ballooning Market Cap

STEVEN RUSSOLILLO

Twitter Inc.TWTR +4.79%shares are flying again Thursday morning, as bullish momentum keeps building behind the microblogging site. The stock has surged 75% this month and is up 180% since the company priced its $26 initial public offering in November. Twitter sports a $38.1 billion market capitalization as of Tuesday’s close, according to FactSet. If Twitter were in the S&P 500, it would be among the top 20% of biggest companies based on market value.UPDATE: Twitter jumped as much as 6.8% Thursday afternoon, pushing its market cap as high as $40.7 billion in intraday trading.

By comparison, retail giant Target Corp.TGT +1.25% has a $39 billion market cap, Yahoo Inc.YHOO -0.49% has a $41.1 billion market value and Time Warner CableTWC -0.53% has a market cap of $37.6 billion.

The rally has confounded investors and analysts alike, who question whether the unprofitable company warrants such a high valuation. “It appears valuation metrics are irrelevant,” Blake Harper, an analyst at Wunderlich Securities, wrote earlier this week, “and that investors are betting aggressively on Twitter being the next great media-technology platform.”

Those bets on the so-called Christmas cult stock are getting more aggressive by the day.

 

Dec 24, 2013

Twitter: The Christmas Cult Stock

By Maureen Farrell

Twitter Inc.’sTWTR +4.79% bird is flying high into the end of 2013.

After spiking 7% Monday, Twitter shares are rallying again in a shortened, Christmas Eve trading session.

The two-day rally adds onto the big December surge for the newly public social media company. Shares are up about 60% this month and have surged 156% from the $26 IPO price. That’s more than four times the average return of other companies that went public in 2013, according to Renaissance Capital.

The stock has notched six separate daily moves of more than 5% apiece in December. It has had only five down days in the month.

Why do investors love the social network so much, especially since many Wall Street analysts are so luekwarm on it? Wunderlich Securities says that Twitter has achieved cult status.

The firm, which has had a bearish stance on the microblogging site, says investors consider its valuation metrics to be irrelevant and are simply betting that Twitter is “the next great media-technology platform.”

“The stock trades at objective measures that are hard to justify relative to peers and the next 2-3 years of expected results for the company,” wrote Blake Harper, an analyst at Wunderlich. “While we believe the valuation is excessive…we acknowledge the stock may be influenced by the investor sentiment to own what they perceive as the next dominant media/tech platform and a limited float that may push the stock higher in the near term.”

One big word of caution: As Twitter’s valuation rises, short sellers have been increasingly piling into the stock. As we wrote late last week, the percentage of Twitter shares on loan—a proxy for short-selling activity—was 4.8% as of last week, according to securities-financing tracker Markit. That’s more than triple the amount compared to when shorting Twitter was first available in mid-November.

If anything, it looks like rising short interest — and the potential for a short squeeze — could be lifting the stock. But if the Twitter bird gets tired, gravity could also pull the stock back down to earth.

Filed under TMT Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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