Admittedly, I’ve been too bearish on Twitter Inc (NYSE:TWTR). I passed on Twitter stock even below $20 last year, and it would double between late October and early March.

The gains made some sense, even if I argued back in February that the run past $30 was way too far. Twitter did post a strong third quarter report in late October that catalyzed the 100%+ gains. GAAP profitability followed in Q4. Twitter’s DAUs (daily active users) rose 12% in 2017, implying higher engagement.

With Twitter stock back at $28, and some good news of late, I can see the outlines of a bull case. But, frankly, I still don’t think TWTR stock is quite cheap enough. Even 23% below last month’s highs, TWTR still is pricing in quite a bit of growth.

The Cambridge Analytica scandal at Facebook, Inc. (NASDAQ:FB) has sent social media stocks plunging, and the negative headlines there will continue in the near-term.

Even at a cheaper price, I just don’t see enough to get excited about Twitter stock.

The Concerns Surrounding Twitter Stock

The core problem for Twitter stock is that it’s simply not that cheap. It seems like TWTR should be cheap, given the stock still trades about 60% below all-time highs reached in early 2014.

But on an EV/revenue basis, Twitter stock still trades at over 6x 2019 consensus revenue estimates. Backing out net cash, the forward P/E multiple is 34x. And EV/EBITDA is in the 20x range.

Across the board, those are multiples assigned to companies that are growing much faster. Snap Inc (NYSE:SNAP), for instance, trades at a similar revenue multiple despite significantly higher top-line growth.

Profit multiples are in line with fast-growing and established software companies — and well above those of established tech titans like Facebook and Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG).

Twitter simply hasn’t proven it merits those multiples. Non-GAAP EPS rose a respectable 19% last year, and adjusted EBITDA 15%. That’s not exactly torrid growth for a tech stock. It’s certainly not enough to suggest a premium to other social media plays.

Meanwhile, short seller Citron Research has questioned Twitter’s data licensing business. The argument from that firm is that Twitter’s revenue could be at risk, given quickly changing consumer (and political) sentiment toward data usage.

Personally, I find that argument as thin as Citron’s case against Shopify Inc (NYSE:SHOP) (Twitter isn’t selling personal data, a la Facebook and Google), but Twitter could get caught in any near-term downdrafts hitting the social media space more generally.

Good News

All that said, I will admit that Twitter’s last few quarters have been better than I thought, and the company at least does have a path to upside. Second-half performance was much improved from last year, and the company will benefit from relatively easy comparisons in Q1 and Q2. The data-licensing business — assuming Citron is wrong — should grow and likely help margins as well.

It’s even possible that Twitter will benefit in some ways from the issues at Facebook. Facebook and Google have driven pretty much all of the digital advertising growth in the U.S. Advertisers who depart or minimize their usage of those sites could see Twitter as an alternative.

And while TWTR looks expensive relative to peers, in that outcome, it could start driving the growth and profitability needed to support the current multiples.

Meanwhile, Twitter has managed to minimize stock-based compensation, a long-running concern of mine, which dropped to $434 million in 2017 from $615 million the year before. It is guided to $350-$450 million in 2018.

So there is some good news here. And, unquestionably, TWTR stock looks more attractive than it did just two quarters ago. But I’m not sure the news is quite good enough.

Can TWTR Stock Get Cheap Enough?

I’m still stuck on the price of TWTR stock, to be honest. Twitter long has been considered a takeover target. But the platform attracted no real interest from potential suitors like Walt Disney Co (NYSE:DIS) and salesforce.com, inc. (NYSE:CRM) when it was up for sale in late 2016 — at a price lower than it currently trades.

Stock-based compensation may be down, but it still accounts for likely ~40% of adjusted EBITDA in 2018 and still represents ~2% annual dilution of Twitter shareholders. And, again, TWTR is pricing in an unreasonable amount of growth even though it has yet to prove it can consistently drive that growth or be attractive to the major advertisers driving growth at other outlets.

I do think Twitter has found a niche, and it has a base of heavy users who love the platform. But I question whether Twitter really can expand beyond its niche, particularly with its video ambitions seemingly being de-emphasized.

And if it can’t expand much, or at all, it’s tough to see $28 being a hugely attractive price. All told, Twitter has value, but I think the market still has that value priced appropriately, at least for now.

As of this writing, Vince Martin has no positions in any securities mentioned.