There are all kinds of metrics to measure the performance of a company, but all the best companies eventually make a lot of money. Here’s a closer look at three big-name companies that haven’t quite got the whole “positive income” thing figured out just yet: Twitter (TWTR), Tesla (TSLA) and Yelp (YELP).
Twitter (TWTR)
Early TWTR investors argued that it would just take some time for high-growth social media sites like Facebook (FB), LinkedIn (LNKD) and TWTR to find a way to effectively monetize their huge customer bases. In the meantime, user growth was front and center.
Unfortunately for TWTR investors, FB has managed to maintain its sterling growth numbers via its transition to mobile. TWTR’s user numbers, on the other hand, seem to have peaked in 2015. At the beginning of 2013, Facebook, Twitter and LinkedIn were all struggling to break even in terms of net income, but Facebook’s earnings numbers have steadily and steeply climbed ever since. TWTR and LNKD earnings have floundered.
See the chart a few paragraphs below for an illustration of this trend.
In the past four quarters, FB generated net income of $3.67 billion, while TWTR net income came in at -$521 million and LNKD registered net income of -$166 million.
The market has been very forgiving to Amazon.com (AMZN) and Netflix (NFLX) as they struggle generating profits due to heavy infrastructure expansion costs, but the lack of a clear plan from both TWTR and LNKD have sent investors running for the hills.
Bottom line? Facebook’s making Twitter look like a chump.
Tesla (TSLA)
TSLA has a lot riding on the highly-anticipated unveiling of the Model 3, coming up tomorrow. In the last 12 months, TSLA generated a net income of -$888.7 million. Not only is Tesla’s income negative, losses have ballooned in recent years. However, while TWTR and LNKD shares are down 65% and 40% in the past two years, TSLA shares have skyrocketed more than 900% in the last five years alone!
That’s because Tesla, much like AMZN and NFLX, still has a longer-term path to profitability. TSLA may have had nearly a billion dollars of losses in the past year, but Ford (F) and General Motors (GM) generated a combined $17 billion in income in that same time. Tesla bulls are expecting that the Model 3, which is priced at $35,000 before incentives, will be the first step into TSLA taking a major bite out of Ford and GM’s existing mass market share.
The huge gains in TSLA stock in recent years seem to suggest that the market is already pricing the Model 3 as a huge hit, which could leave the stock’s risk/reward skewed to the downside in coming years. After all, the company has never proven that it has the ability to generate consistent profits, much less become a major player in the global auto industry.
Yelp (YELP)
YELP is yet another service that everyone knows, uses and loves…but doesn’t want to pay for. YELP’s revenue is up an impressive 62.4% in the past two years. Unfortunately, rising marketing and operating expenses have outpaced revenue. In the past four quarters, YELP hasn’t managed to keep its head above water, generating -$32.9 million in net income.
In the long-term, YELP is hoping that the huge amounts of money it is spending on international expansion will pay off, but so far international markets contribute a meager 2.0% of YELP’s total revenue.
The market is clearly not impressed by YELP’s vision for a profitable future. Shares are down 74.9% in the past two years.
As of this writing, Wayne Duggan had no positions in any of the stocks mentioned.
