Q: Why does Twitter stock keep soaring?
A: Apple was the stock to own in 2012. Google was investors' pet in 2013. Now investors are acting like 2014 is the year of Twitter.
Shares of Twitter have rocketed from their November 2013 IPO and enjoyed a breathless run for months. Shares of the online service for small messages were initially sold to investors at $26 a share on Nov. 6, 2013. Shares then rallied 145% in 2013, turning them into a stellar standout during what was already a spectacular year for stocks.
Lately, though, the stock is running into trouble. Shares of Twitter are down 11% this year so far as the broad stock market continues to sink.
On Monday, another down day for stocks in general, Twitter was hammered -- dropping 6.2% to $57.91 a share.
Big gains in Twitter going into the year were powered by high hopes the company will be able to turn its massive user base into dollars. The company still hasn't even begun trying different types of advertising in its offering. Also, due to the way the service is structured, it's practically custom built for younger users who often turn to Twitter as their first go-to online service.
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But the company is going to have to start delivering to justify its lofty stock price, a realization investors seem to be coming to. The company is trading for 56 times its tangible book value. In plain English, that means Twitter is 367% more expensive than Facebook. Investors are looking past the company's losses now, but analysts expect it to make progress and eventually turn a profit in 2015.
Follow Matt Krantz on Twitter: @mattkrantz.
That’s what’s call unpredictable.. Few days back have read somewhere that TWTR stocks are not much inn but now see it. Wow! Informative article , thanks for sharing.
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