The Verdict – FB Stock Is a Better Deal
There seems little doubt that both Facebook (FB) and Twitter (TWTR) will benefit from the mobile revolution. Each have platforms that continue to grow and attract substantial revenue, which bodes well for FB stock and TWTR stock in coming months.
Sure, there is lots of competition, as seen with SnapChat, Line and WhatsApp. But these companies are still in the early stages of monetization. Meanwhile, Facebook and Twitter have extensive relationships with brands and have been working hard to create programs that meet their needs.
But as for the Facebook vs. Twitter standoff, I think FB has the edge. Again, it has greater scale and has been able to achieve profitability … something Twitter has yet to do so.
Then there is the valuation. TWTR stock is trading at an eye-popping 63 times revenues … so Wall Street is expecting perfection. When it comes to the dynamic world of social media, though, things can get rocky. Even a slight miss on earnings could wreak havoc on a momentum stock like TWTR.
FB stock, on the other hand, sports a price-to-sales multiple of a much more reasonable 19. Considering valuation, plus the company’s breadth of users and data, Facebook stock looks like a better bet for investors right now.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.