21st March 2016
As Twitter marks its 10th anniversary, Mark Hawtin, investment director and technology equity specialist at GAM believes while the success of the group as a media asset is clear, as an investment, the story is less cut and dry, he explains why…
With over 13bn registered users and 100m logins daily, Twitter has changed the way we communicate, in a mere 140 characters.
Users send 347,222 tweets every minute of every day – communicating with friends and strangers around the world on every topic imaginable. Nothing is off limits for the digital generation.
2015 was a tough year for the stock, which closed down 36%. Reflecting the trend of increasing differentiation between mega-cap internet stocks, the likes of Facebook, Amazon, Netflix and Google rose to fame in 2015 as the infamous ‘FANGs’, while casualties included Yelp, Pandora and Grubhub, alongside Twitter.
However, at its current price, the blue bird stock does look much more reasonable.
New tech challenging old tech is a theme we constantly follow. Investors need to look beyond market hype around the latest gadget or programme and focus on fundamentals.
So while Twitter is a great communications platform, monetising its popularity is another matter entirely.
One new tech name we are more positive on is the infamous Facebook.
The company reported stellar quarterly numbers that blew estimates away. Ad revenues were surprisingly strong and the operating cost guide was better than expected.
Capital expenditure was guided above expectations to USD 4-4.5 billion as Facebook invests in more data centre capacity.
This reinforces the cloud infrastructure story that we see hitting inflection this year and benefiting names like Microsoft and Amazon.
We calculate that if you assume that all Facebook users in the US are between the ages of 14 and 65, then about 75% of the US population uses the site every single day – that is mind blowing in terms of engagement and, importantly for investors, provides huge reach for advertisers.