In mid-December I bought Twitter stock for ~$45 a share. Here’s why:
- I’m bulling on Twitter as a social network. I think it has lots of great use cases that almost anyone could benefit from. It will only grow in popularity once people start realizing what it is.
- I think Dick Costolo is a great CEO and product person. I’ve watched numerous interview with him (including this great PandoMonthly one), have followed his path since Feedburner, and I believe he has the company running on the right track and is doing a great job.
- Twitter is just now starting to monetize but I think they’ll be able to pull in a good amount of money.
- When I bought their market cap was 20 billion. At 10x multiples, that means they have to have yearly revenues of $2 billion. That seems feasible for me that they’ll get there.
I was happy with my purchase. Then, on Wednesday night Twitter announced their first ever earnings since going public. What a disaster it was. First off, everyone compares them to Facebook even though they are completely different. Second, they have seemed to have stopped growing. Look at this chart:
That’s not good. They need to grow. They only added 1 million US users in Q4. Wow, that is a crazy low number.
So, while I am still a believer, I think it might be a tough year or two (or three) until they hit mainstream. Trust me, it’ll be a better world when they do.
