3. Twitter, Inc. (NYSE:TWTR)
Number of Hedge Fund Holders: 68
Twitter, Inc. (NYSE:TWTR) is a California-based social media company. Twitter, Inc. (NYSE:TWTR) has been in hot water since Elon Musk said that he would purchase the company, only to back out of the deal later, citing Twitter, Inc. (NYSE:TWTR)’s lack of transparency about the bot accounts on the social media platform. Since then, Twitter, Inc. (NYSE:TWTR) has taken Musk to court, and the litigation also revealed several internal issues at the company as many employees spoke out. It is a wise idea to avoid this tech stock until legal proceedings end and the company’s future plans are certain.
On August 5, Susquehanna analyst Shyam Patil downgraded Twitter, Inc. (NYSE:TWTR) to Neutral from Positive, slashing the price target from $50 to $45. The analyst cited the “associated uncertainty and disruption” regarding the pending takeover by Elon Musk for the downgrade. Additionally, Twitter, Inc. (NYSE:TWTR)’s Q2 financial results provide limited visibility into business trends, the analyst told investors.
Among the hedge funds tracked by Insider Monkey, Paul Singer’s Elliott Management is the biggest Twitter, Inc. (NYSE:TWTR) stakeholder, with 10 million shares worth about $387 million. Overall, 68 hedge funds were bullish on the stock at the end of March 2022, down from 83 funds in the last quarter.
Here is what RGA Investment Advisors has to say about Twitter, Inc. (NYSE:TWTR) in its Q4 2021 investor letter:
“Twitter had an eventful quarter. The company started the year seemingly ready to fly for the first time as a public company. Consensus estimates for 2023 revenue started the year at barely north of $5b and by the end of the year were just shy of $7.5b, a target the company offered at their first investor day in years. Unfortunately, it was a second target offered at that same investor day that did them in: 330 million mDAUs by the end of 2023. Typically stocks follow revenues, but mDAUs became the noose around the stock, and perhaps even Jack Dorsey’s tenure as CEO. With each quarter reported following the investor day, the mDAU target became increasingly harder to achieve as the user base grew below the run-rate required to get there in straight-line fashion. Although the company stated this would happen, investors were left wondering how an already lofty target could be achieved with a higher hurdle. Importantly, however, the revenue target continued to look increasingly achievable with each passing quarter. Taking a step back, people came into the year convinced Twitter had a monetization problem, but exited the year focused on their user base growth.
As always, the Street is incredibly myopic about the company, but we are far more sanguine. The user base will exit the year growing at what we thought was a more appropriate quarterly run-rate (6-7 million quarterly new users), consistent with the acceleration that began before the COVID-induced bump in Q1-Q2 of 2020. As it stands today, Twitter is trading near its lowest multiples as a public company (on both EV/S at ~4.5x forward and EV/EBITDA at ~18x), at a time when it will report its fastest growth rate as a public company and over the next two years is expected to report two of its next three fastest growing years. Altogether, the years 2021-2023 should be the company’s fastest three-year CAGR period by a lot, meanwhile the last time Twitter traded at multiples this low was in 2017 when revenue actually contracted 3.41% during the year. There is little that can actually justify such a disconnect where the company’s growth is as swift as ever, but its multiple is consistent with negative growth periods. Twitter remains drastically under monetized, has a long runway of opportunity ahead on both the user growth side and monetization, and has optionality in pursuing subscription, data and/or service extensions of the core offering.”
