Is Either Snap Stock or Twitter Stock Worth Owning?

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Snap stock - Is Either Snap Stock or Twitter Stock Worth Owning?

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Howard Lindzon’s latest blog post about Tencent Holdings’ (OTCMKTS:TCEHY) misguided $2 billion investment in Snap (NYSE:SNAP) has to make long-time owners of Snap stock question their sanity for hanging on as it’s dropped from $20 to less than $7.

“Their [Tencent] $2 billion investment in Snapchat when the stock was at $12 now just looks sloppy as Snapchat bleeds money,” Lindzon wrote Oct. 10. “I am not sure if the markets are more worried about Tencent losing the $2 billion they invested in Snapchat or that they may buy the remaining 88 percent of it.”

Snapchat and Snap stock is in free fall making Twitter’s (NYSE:TWTR) 22% year-to-date return (through Oct. 9) look pretty darn good.

Is Twitter a Buy?

Well, some thought it was before it announced second-quarter 2018 earnings in late July that included fewer monthly active users than expected. On that news, TWTR stock lost $13 in year-to-date gains and is down another $3 in the two-and-a-half months since.

As I write this, TWTR is down almost 5% in early trading. Not good if you’re Louis Navellier, an InvestorPlace contributor and longtime editor of several investment newsletters.

“What spooked investors was that Twitter had fewer monthly active users than expected,” Navellier wrote Sept. 20. “While the news had some shareholders running for the exits, I doubled down. I recommended it as a buy in my newsletters.

That takes courage.

However, Navellier makes two good points about Twitter.

The first is that there are over 500 million tweets every day. Without Twitter, how are businesses and opinion-makers going to get their story out?

Facebook (NASDAQ:FB) is the obvious answer, but it’s got its own set of problems at the moment. Long-term, I’m a fan of Facebook stock, but it’s going to be a bumpy ride until Mark Zuckerberg and company figure out how to keep user data safe and secure.

InvestorPlace contributor Dana Blankenhorn believes we’ve reached peak Twitter and what comes next will have consequences for the social media platform’s stock.

I’m not so sure for the simple reason that nothing is waiting in the wings to replace it. People tend to be committed to something until a better alternative comes along. At this point, I don’t see one.

The second point that Navellier makes is that Twitter is finally profitable, delivering earnings surprises in three out of the last four quarters.

Heck, its free cash flow in the trailing 12 months is $636 million and moving higher. That, as Navellier suggests, is Jack Dorsey finally figuring out how to monetize Twitter successfully.

Like Facebook, it’s better if Twitter worries less about the number of monthly active users, and more about the user engagement, because that’s what advertisers are genuinely concerned about.

Although I prefer Dorsey’s Square (NYSE:SQ) over Twitter, it’s hard to argue with earnings.

Twitter’s got them. Snap doesn’t. 

The Bottom Line on Snap Stock

While this article likely seems like it’s about Twitter and not Snap, the reality is that investing is all about options. Stock A vs. Stock B, growth vs. value, profitable vs. unprofitable — you get the picture.

If I had to buy one of either Twitter or Snap, there is no question I’d buy the former rather than the latter.

Does that mean you shouldn’t buy Snap? No, it doesn’t. However, I think it’s pretty safe to say one of these social media platforms has turned the corner and one hasn’t.

I’ll leave that for you to decide.

As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


Article printed from InvestorPlace Media, https://investorplace.com/2018/10/either-snap-stock-twitter-stock-worth-owning/.

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