Twitter IPO day has come and gone…and now Twitter (TWTR) stock is down about 6% from the over 70% pop it saw on its first day of trading. That’s about as expected, as I discussed on CNBC:
Suffice it to say, at 45 times trailing earnings, Twitter is highly speculative at current prices. Could it go higher? Absolutely. But investors are pricing in a massive surge of revenue growth that may or may not materialize. This is a speculation for your “play money” that you can afford to lose. It is most certainly not appropriate for your retirement nest egg.
Twitter is at the cutting edge of a media revolution. It’s all very exciting. But their business model is still untested and hasn’t turned a profit.
Should you invest in Twitter? If you want to be a part of its media revolution, go for it. But again, go into the trade with the right mindset. This is a speculative trade in which you could make a fortune…or just as easily lose half your capital or more. It’s not a prudent investment.
Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE 8-part investing series that will not only show you which sectors will soar, but also which stocks will deliver the highest returns. This series starts Nov. 5 and includes a FREE copy of his 2014 Macro Trend Profit Report.