Twitter to $15 ... or $150? Pros debate

Tuesday, 10 Dec 2013 | 3:44 PM ET
Twitter: Overvalued or a great opportunity?
Tuesday, 10 Dec 2013 | 3:15 PM ET
Should investors be adding Twitter to their portfolio? Brian Evans, Bond Street Wealth Management principal, thinks the stock is overvalued. Rob Sanderson MKM Partners, says Twitter's rich valuation speaks to its great opportunity.

Just where are shares of microblogging site Twitter headed? It depends on who you ask.

On Tuesday's "Closing Bell," two stock market observers took very different views on the social media company's stock, which made its debut on the New York Stock Exchange last month under ticker symbol TWTR. Though Twitter set a starting price for its initial public offering at $26 a share, the stock spiked to $50 a share on its first day of trading and currently trades at around the $51 level.

'#Ring!' is displayed on a mobile device as the company announced its initial public offering and debut on the New York Stock Exchange.
Getty Images
'#Ring!' is displayed on a mobile device as the company announced its initial public offering and debut on the New York Stock Exchange.

But Rob Sanderson, a managing director and senior analyst at MKM Partners, thinks the stock could soon approach $150 a share. Sanderson admits the valuation is a little stretched, but contends Twitter is the most powerful media property today and has tremendous potential as an advertising medium.

He added that it has the best engagement and growth metrics of any social media company and has potential to expand revenue to $9 billion in the 2020 time frame.

"It's a topline acceleration story and it's open-ended," Sanderson said. "So long as we're beating on the topline and you got open-ended growth and a growing audience, it's going to continue to be a rich stock."

Not so fast, said Brian Evans, a portfolio manager at AdvisorShares. Evans argued its valuation is bloated based on its fundamental data, with operating cash flow at just $9 million and running at a loss. Meantime, its gross revenue per registered user is about $1 per year.

"We've seen this kind of thing play out before during the dot-com time period where we were buying companies based on topline growth, but when it comes down to it, it's the bottomline growth that's going to sustain a stock," Evans said, adding he thinks TWTR could eventually fall to just $15 a share, and only at that price would he recommend buying the stock..

—By CNBC's Drew Sandholm. Follow him on Twitter @DrewSandholm


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