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TWTR

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Re: TWTR

#141

Post by bcbrown »

giarc wrote: post #123
colinbartlett wrote: post #80

Earlier quoted context omitted.

To add to this, just remember one simple fact: When you are a long a stock, the most you can lose is the amount you paid. When you are short, you can lose unlimited money.

I don't trade stocks, nor do I claim to know that business at all. Can you explain this concept?

A short is borrowing stock to sell, promising to re-buy that stock in the future to give back to the lender. The stock price can rise arbitrarily high, which means you may have to pay an arbitrarily high price to re-purchase the stock in the future. See "short squeeze" and read about the Volkswagen/Porsche example a couple years back.

Re: TWTR

#142

Post by fennecfoxen »

twistedpair wrote: post #88
the_watcher wrote: post #36

I'm not an expert in the stock market, and the only stock I own is Facebook (which I bought a long time ago), but I am confused as to why Facebook is dropping today while there is so much enthusiasm for Twitter. Buying Twitter is basically betting on mobile advertising, which Facebook is the clear leader of. Is it possibly related to people with Facebook stock selling some to get in on Twitter? Are they entirely unre…

A typical P/E ratio is around 13. Take Apple, smack on 13. If it is too high, you're spending too much. No official numbers for Twitter's profits, all guesses, but a suggested $116M profit this year gives a current P/E of 207. That means it would take 207 years, ignoring inflation (which would make it much worse) for the company to actually pay its investors/owners back the price of the company. This is why people ar…

A P/E of 207 could also be expressed as 1/207 = 0.48% rate of return on your investment. That's easier to compare to inflation, and to your bank account. :P

Of course, your bank account doesn't have much opportunity to grow its business, and Twitter doesn't have FDIC insurance.

More generally, the value of a company is the sum of all its anticipated profits for all time... discounted for inflation, risk, and the time value of money. (The first two of those discounts are obvious; the "time value of money" is just the fact that it's better to have $50 now than an inflation-adjusted $50 in 30 years because you could do something with the money now, like invest in other companies or invest in bonds or invest in re-insulating your basement to save on heating.)

Re: TWTR

#143

Post by corford »

nonchalance wrote: post #113
corford wrote: post #82

Can someone with more clue please tell me that the following cynical thought I keep having is wrong and laughably misinformed (and then explain why)? Twitter's investors (who have plowed hundreds of millions in to a loss making company) decide to sell some of their stock at $26/share (after consulting with banks to arrive at this price). This will make right the losses they've experienced so far and pass the problem…

The simple answer is that a share price is the present price to pay for the future cash flows of the company. Just because they aren't making money now doesn't mean that will always be the case. If twitter starts making billions of dollars soon, and starts paying that out to investors, then everyone makes money. They "eventually foot the bill" if twitter doesn't make money. Your cynicism reflects the fact that many c…

I find it hard to accept that a rational person thinks twitter will ever have the profit earning capability of Google. It just seems nuts to me to justify twitter's future earnings potential on a black swan event.

Speculation on the other hand I can sort of understand and accept (although it's kind of sad that the speculation is driven entirely by hype rather than any kind of solid metrics).

Re: TWTR

#144

Post by tootie »

corford wrote: post #119
tootie wrote: post #105

Earlier quoted context omitted.

The market still has to be willing to buy at $40+ which they evidently are. They do this expecting to sell down the line for even more.

So in effect it's just one giant speculation game that everyone's in on and the only trick is not to be left holding shares when the hype stops? I guess I'm fine with that as long as everyone playing knows the rules (although it's tough for the index funds that have no choice in the matter).

That's an oversimplification. For one thing, stocks can pay dividends even though few do anymore and Twitter seems unlikely to do so any time soon. Also, there's no reason the hype needs to ever die. GE has been trading for 120 years.

Re: TWTR

#145

Post by tedunangst »

yummyfajitas wrote: post #91
raganwald wrote: post #11

Earlier quoted context omitted.

Can you say for a fact that if they priced at $46 that people would have bought at $46? Markets are highly irrational.

What does it mean for a market to be "highly irrational"? Normally the term "irrational" is applied to actors, while "efficient" refers to markets. Are you suggesting markets are not efficient? In that case, when can we expect you to become extremely wealthy from your inefficiency-proving strategy? (Claiming the EMH is false is equivalent to claiming that such a strategy exists.) Incidentally, when an actor behaves i…

I believe the counter argument to a money making inefficient market strategy is "I'm just a little guy and the big evil bankers won't let me make money".

Re: TWTR

#147

Post by tobyjsullivan »

corford wrote: post #82

Can someone with more clue please tell me that the following cynical thought I keep having is wrong and laughably misinformed (and then explain why)? Twitter's investors (who have plowed hundreds of millions in to a loss making company) decide to sell some of their stock at $26/share (after consulting with banks to arrive at this price). This will make right the losses they've experienced so far and pass the problem…

When you say "Joe Public" you make it sound like the stock is being bought with our tax dollars.

Anybody who buys TWTR is making an informed decision and expects Twitter to do very well. It's hard to imagine Twitter today eventually being worth the current market cap of $25B. However, take a look at Google as a prime example of success.

When GOOG first hit the market in 2004 it got a market cap of $23B. It was somewhat hard to imagine a web search company ever being worth that much. Today it's at $340B.

Re: TWTR

#148

Post by clarky07 »

yummyfajitas wrote: post #91
raganwald wrote: post #11

Earlier quoted context omitted.

Can you say for a fact that if they priced at $46 that people would have bought at $46? Markets are highly irrational.

What does it mean for a market to be "highly irrational"? Normally the term "irrational" is applied to actors, while "efficient" refers to markets. Are you suggesting markets are not efficient? In that case, when can we expect you to become extremely wealthy from your inefficiency-proving strategy? (Claiming the EMH is false is equivalent to claiming that such a strategy exists.) Incidentally, when an actor behaves i…

I don't know if he is, but I would certainly suggest that markets are not efficient. Not even close. Google had a 40 billion dollar swing in valuation in a day last month. Were they really worth 40 billion more that day? Apple lost 300 billion in market cap in a matter of 6 months. Either they weren't worth that much at the peak, or they weren't worth that little at the bottom. There is no way you could ever convince me that Apple was efficiently priced at both ends (most likely neither end).

Knowing that the market is inefficient is not equivalent to knowing which stocks to buy or sell, or when to do so. It doesn't give you a magic formula, but it does give you some idea of what to look for.

FWIW, I have done pretty well picking stocks for myself, but I'm far from what I would consider "extremely wealthy". That being said, if I had a magic formula for instant huge wealth you can be damn sure I wouldn't be sharing it.

Re: TWTR

#149

Post by SCAQTony »

Facebook, Twitter, Linkedin...Sometimes I think the NASDAQ is looking more like the "Fine Art" auction market rather than an actual stock market.

Re: TWTR

#150

Post by brymaster »

nonchalance wrote: post #129
brymaster wrote: post #124

Earlier quoted context omitted.

> Just because they aren't making money now doesn't mean that will always be the case. This is dangerous speculation.

It's also dangerous to assume that all companies must be profitable from day one. Facebook is a good example of a company that was "losing money" but was able to turn profits recently. Which is not to say that I believe twitter deserves the market cap currently implied by the share price.

Facebook is also a good example of a company with its business model out of whack, meaning this ride isn't going to last.
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