Shares of Twitter, Inc. (NYSE: TWTR) are receiving a lot of investor interest as of late due to the stock’s 20.2% increase over the last month. Shareholders are now asking themselves whether the company’s current stock price is reflective of its true value or if shares have even further upside from here.
Let’s take a look at Twitter’s value and outlook based on its most recent financial data to see if there are any catalysts for a price change.
What Is Twitter Worth?
Twitter appears to be overvalued by -23.4% at the moment, based on 9 separate valuation models. The stock is currently trading at $44.98 on the market compared to our average intrinsic value of $34.47. This means that the opportunity to buy Twitter at a good price has disappeared.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$30.76||-31.6%|
|5-yr DCF Revenue Exit||$31.59||-29.8%|
|Peer Revenue Multiples||$24.67||-45.1%|
|10-yr DCF EBITDA Exit||$51.11||13.6%|
|5-yr DCF EBITDA Exit||$60.19||33.8%|
|Peer EBITDA Multiples||$32.41||-28.0%|
|10-yr DCF Growth Exit||$32.18||-28.4%|
|5-yr DCF Growth Exit||$33.59||-25.3%|
|Peer P/E Multiples||$13.74||-69.5%|
Click on any of the analyses above to view the latest model with real-time data.
In addition to this, it seems like Twitter’s share price is quite stable, which could mean two things. One, it may take the share price a while to fall back down to an attractive buying range, and two, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta of 0.80.
How Much Growth Will Twitter Generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.
source: finbox.io data explorer
With EBITDA expected to grow on average of 30.0% over the next couple years, the future certainly appears bright for Twitter. It looks like higher cash flows are in the cards for shareholders, which should feed into a higher share valuation.
While many investors tend to categorize stocks as either value or growth plays, the most successful investors view growth in conjunction with a company’s value. Take legendary investor Peter Lynch for example, who is widely known for popularizing the term growth at a reasonable price (GARP).
GARP is a strategy that combines aspects of both growth and value investing techniques by finding high growth companies that don’t trade at overly high valuations. In the application of this strategy, Lynch achieved 29% annualized returns as the manager of Fidelity’s Magellan Fund from 1977 to 1990. Needless to say the importance of analyzing a company’s fair value in addition to its growth prospects.
Twitter has positioned itself so that double-digit growth appears to be a reasonable assumption for the foreseeable future. However, this growth does not look highly attractive at current trading levels. As such, investors may want to hold off on buying or adding to their TWTR position for the time being.
However, if you have not done so already, I highly recommend you complete your research on Twitter by taking a look at the following:
Efficiency Metrics: is management becoming more or less efficient over time? Find out by analyzing the company’s asset turnover ratio which measures the dollars in revenue a company generates per dollar of assets.
Risk Metrics: how is Twitter’s financial health? Find out by viewing our financial leverage data metric which plots the dollars in total assets for each dollar of common equity over time.
Valuation Metrics: how much upside do shares of Twitter have based on Wall Street’s consensus price target? Take a look at our analyst upside data explorer that compares the company’s upside relative to its peers.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.