Firebird TWTR

I wrote yesterday about the introduction of Twitter to the New Your Stock Exchange. Now 24 hours later, the results are astonishing!

A strong pressure to buy was probably the greatest factor, throttling the rate to $45 at closing compared to an introductory price of $26 - an increase of amazing 73%. Considering how most companies pop the bubbles if they break even on their first day of launch, this cannot be called anything but a huge victory for Twitter.

Twitter released 70 million shares at the IPO and, in case of oversubscription, an additional 10,5 million shares where going to be released. The shares were oversubscribed 30 times, which testifies to a colossal interest, and the price for the stock followed suit. At its peak, the stock price reached $50.

So how will Twitter fair in the future on the stock market? I think the first couple of months will now be wobbly. This in an uncertainty that has many factors, but I think the best one is reflected in the analysts' price targets that were ranging between $29 and $54. What this tells us is that the market has a extremely hard time valuing Twitters assets, and thereby also its market potential.

Twitter has 230 million users, including celebrities, politicians and journalists, and this is the main reason why investors are enthusiastic about the company. But Twitter has also never shown a profit, and how they are going to turn this around is still an unanswered question. The injection of money that Twitter now gets from the stock introduction is well needed, but without a solid plan ahead this is just a time saver.

Launching TWTR on a Thursday is also controversial; today is Friday, and the markets will now close for two days, possibly cooling what could have been a further increase. A lot of the initial 73% is a inflated value, and it will drop within the upcoming week, but giving it a few more days would have created a greater buffer softening the drop. Investors will now have two days to go home and rethink their decision to buy, and if there is something that is ALWAYS bad for stock prices it is investors rethinking.

Twitter's new business plan will most likely include an increase in ad, and sponsored tweets. When Facebook released its similar to the public, there was an outraged. People were arguing that Facebook would be too commercialized, however having lived with the ads for quite some time now, I cannot really say I notice them. Neither does the rest of the users (it would seem) since we are not hearing any complains, and the user count hasn't dropped either.

My take on this is that TWTR will flatten out during next week, and then drop some leading in the two weeks that follows. By the start of December, Twitter will most likely release a X-mas campaign, again sparking interest and the stock is going to go up. This is also the time to get on the wagon. TWTR will by then have found its place in the market, Twitter will have released their long-term plans for the company, and X-mas sales will fuel the increase!

Mark Dec 2 for acquiring TWTR!

Enter TWTR

The big new of the day is without a doubt the addition of yet another social media company on the New York Stock Exchange.

Following in the footsteps of big brother Facebook, and the more conservative cousin LinkedIn, Twitter is now making its trading debut. Pricing the shares at $26 on Wednesday, the total company would value the at around $14 billion - a fraction of Facebook's 122 billion.

A more relevant comparison would then be LinkedIn, which was listed on the NYSE in 2011. The stock
was priced at $45 on its initial public offering, but then roared out of the gates rising as much as 171 percent in their first day of trade on the New York Stock Exchange, and closed at $94.25, a total increase of more than 109 percent. The stock has since risen even more, valued today at $25 billion. 

A significant difference exists, however: while LinkedIn earned $ 3.7 million during the last quarter, Twitter has still some way to go to show a profit. For the year 2012 Twitter had a total revenue of $317 million, but still reported a net loss of $79 million. 

However, a lot of Twitter's attraction lies in the appeal of some of its users, rather than in its accounts. Every seems to be tweeting; form politicians and opinion leader, including President Obama, the Dalai Lama, the Pope Francis, a number of Nobel Prize winners to each celebrity with self esteem, keeps an active Twitter Account. Twitter is today a place for any exchange of opinion, both comical as controversial. 

For Twitters experts are predicting that the company's total revenue may increase to reach $620 million already this year. Operating profit is predicted to be $ 40 million, according to USA Today. The listing also adds a well needed $1.7 billion to Twitter's own financing. 

The real question of whether the listing will be profitable or not ties into what Twitter will do next to generate money. Is has speculated that mid-tweet ads are the future here. The fact that Twitter's core business is ads, means there's potential for Twitter to help marketers sell stuff, not just when users shop online or in stores after leaving Twitter, but right in the moment, within Twitter.com or a Twitter mobile app. Twitter has made it public that it sees huge potential here. In August they hired former Ticketmaster CEO Nathan Hubbard as its first-ever head of commerce.

So, how would Twitter commerce work? Twitter could use information about users' location and interests to offer products or deals. Eventually we can expect Twitter to allow users to link a credit card to their account for one-click purchases within Twitter. Twitter could also partner with the likes of eBay, Amazon or Etsy to link accounts, so users could make a purchase without inputting credit card information.

So, in or out? My best best is to get in as early as possible. By all accounts it seems as the stock is undervalued, and missing the train now may mean that you cant get on it at all later. 

What do you think of the Twitter stock? Leave your comments below.