Twitter Earnings and the Market Philosopher


No one really knows what $TWTR is worth. No wonder, the stock gaps on every quarterly release. This is how it went on 2/6/2015:


But this Bloomberg chart does not reveal the actual volatility that occurred in the first 10 minutes after the afternoon earning announcement. The stock dipped all the way down to the $37 handle, before the disappointment in the user growth gave precedence to the upside earnings surprise.

With no history to “smooth out” quarterly earnings volatility, the investors put a lot of weight on each release.

Twitter bears focus on the slow MAU growth, while the bulls are encouraged by the faster than anticipated monetization, widening advertising platform and the outreach to logged-out users.

I have no qualification to perform a “value” analysis on the stock based on any performance metrics. And my best guess: no one else does.

$TWTR is my philosophical play.

Yes, Twitter is not yet in the realm of numbers. It is in the realm of philosophy.

There are multiple skirmishes happening on the edges of social media domains, such as  instant messaging or video streaming. Twitter is losing some battles and winning some others.

Certainly, I prefer $TWTR to win every time, but when it suffers a setback, I am not too concerned. As long as it holds the heartland: the monopoly on being the real time conduit of power and influence.

Twitter is not for everyone, and Twitter is not Facebook. It is designed perfectly for distribution of information, opinions, jokes and fashions from celebrities and thought leaders to people who care about such things.

And that’s the key: Twitter will never get the engagement of Facebook, but it gets the kind of engagement that is shaping our civilization in real time.

I choose to believe that such incessant flow of power can be monetized.

$GOOG, $FB and $TWTR are similar in this way. Like the British Empire they have the privilege of holding their “island monopoly” and fighting wars on other nations’ territories.

Of those three companies, Twitter is most speculative and its future is most uncertain. I happen to think that the upside is large and I like the risk-reward profile, but it is not for everyone.

When the earnings will be released tomorrow afternoon, there likely to be volatility. I would read any numbers with a grain of salt. As I have said, it is too early for numbers. So if I wanted to trade the earnings, I would try to take advantage of the intraday volatility to implement positioning for my long-term views.

This is a principle I try to apply to all markets: “don’t panic after a news release, stick to your program”.

Image: “The Philosopher and the Bird” by Gideon van der Stelt

If the market is a bubble, why so many stocks look cheap?


“The stocks in my portfolio are precious gems, immune to any problems in the system”. Yes, I know it’s a fallacy.

So, please, help me sort it out. I have been dragged into the raging debate on stock valuations. I have to confess, I feel out of my league on this issue, when engaging with such thorough experts as @Jesse_Livermore (, a moderate bull, or @jessefelder (, a moderate bear.

When I write about interest rates or currency, I possess (or at least project) much authority and experience. But I know relatively little about corporate valuations. My inclination to stay long equities over the last few years has been a function of my observing historical patterns and trends and my long-term portfolio strategy, but had little to do with whether I thought the overall market was still cheap.

So let me share my confusion. Reading various pieces on the overall US stock market valuations, I find the analysis ranging from fair to very expensive. Yet when I look at individual companies I know, so many of them still look like a bargain.

What DO I know? I mostly follow banks, tech, and social media. I know nothing of consumer, retail, utilities, biotech and so on.

Let’s start with banks. (I source P/Es from Yahoo! Finance).

$JPM  11.24;  $WFC 13.29;   $GS 10.97

Those guys seem to be priced for various degrees of bankageddon. Indeed, they don’t need any growth to justify their valuations, all they have to do is not to have all their earnings taken away by fines.

Established tech.

$IBM 13.49; $INTC 13.02

What is going out style? Computers or computer chips specifically?

All of the above enjoy a healthy growth of EPS via buyback and cheap funding. Some scoff at buybacks, but to me buying your own shares, when they are cheap, and locking the funding seems like a great investment.

Now let’s move to the growth sector.

$AAPL 16.82;  $GOOGL 26.85; $FB 74.65; $TWTR N/A

Are those the culprits of overvaluation?

$AAPL is certainly not as dirt cheap as it was a couple of years ago (similar to $INTC), but still doesn’t look stretched at all, given the power of their brand and continuing revenue growth.

In fact, all four companies above have virtually indestructible brands. There monetization is at different levels of maturity. But it’s hard to imagine any of them to be a terrible long-term gamble.

So where does the overvaluation lie? Is it all the biotech’s fault?