One of the buzziest topics in the investing world lately has been Twitter (TWTR). The social media company was one of the most sought-after IPOs of the year as the stock popped to $44.90 per share on its first trading day, after the IPO priced at $26 per share. Since then, the stock has had a strong rally and closed on December 20, 2013, at $63.75 per share, resulting in a market cap of over $36 billion.
However, the market’s perception of Twitter’s valuation is far beyond the company’s fundamental valuation. We’re not saying the stock will decline in price, but we can say that where it’s priced is probably not what it’s worth, and that relative to its comps, Twitter is probably too expensive.
Read on to find out why we think Twitter is a bad deal from both a relative and absolute value perspective.