In the past few weeks, the tech industry has been very shocked. In the Cambridge Analytica scandal, investors were cautious about Facebook (FB), allowing other social media to start attracting more attention.
Another major social media Twitter Twitter (TWTR) has jumped to Zacks Rank #1 (Strong Buy). With Facebook-like advertising driving business models, Twitter may be the choice of investors who want to turn to another large social media option.
Here’s why Twitter may be an exciting stock detail this year.
In the past year, Twitter’s stock has doubled. In April last year, the stock price was 14.40 US dollars. In April this year, the stock price was 28.76 US dollars. What is the driving force behind this surge? All this is centered on growth.
Twitter currently embodies the “A” level in our growth score category system. It is worth noting that it is expected that the company’s average annual EPS growth rate for the next three to five years will be 21.5%. This, together with the surge in stock prices last year, indicates that investors expect a long-term growth game to take off early.
Growth investors will also be happy to hear Twitter’s cash/price ratio of 0.21, more than double the industry average of 0.09. In addition, its yield is currently 0.59%, while the industry average is -1.09%. Both statistics show that a profitable company is rising.
However, if financial stability is determined, growth can only be considered as a plus. Fortunately, Twitter’s cash flow is $0.70 per share, indicating a solid financial position. With these numbers, it’s easy to see why Twitter is a highly sought-after growth stock, but there are several drawbacks to consider.
The main concern of Twitter stock is its valuation. Currently, Twitter’s P/E ratio is 168.1, the P/CF ratio is 40.9, and the PEG ratio is 7.8. The respective industry averages are significantly higher. All of this shows that Twitter’s valuation has been exaggerated and clearly reflects its current “F” rating in the value category of our style score.
Although Twitter may be overestimated, Facebook’s overwhelming positive growth data and current troubles may be indicators of a major shift in the stock. For growth investors who want to leave Facebook, Twitter is a powerful choice, and these growth factors have helped push Twitter into Zacks Rank #1 (Buy).
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