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A Closer Look at Twitter’s Valuation

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Aug. 28 2017, Updated 1:06 p.m. ET

Shareholder returns and stock trends

Twitter (TWTR) generated investor returns of -15.7% in the trailing-one-month period and -9.3% in the trailing-12-month period. The company’s stock price rose ~5.0% in the trailing-five-day period.

Facebook (FB), Amazon (AMZN), eBay (EBAY), and Yelp (YELP)—Twitter’s peers in the Internet sector—generated returns of 35.7%, 25.7%, 13.8%, and 11.9%, respectively, in the trailing-12-month period.

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Examining Twitter’s cash flow metrics

Twitter has $4.1 billion as cash in hand. Its price-to-cash-flow multiple is 16.1x, and its price-to-free-cash-flow multiple is 21.8x. For the trailing 12 months, the company’s EV[1. enterprise value]-to-cash-flow multiple was 13.1x, and its EV-to-free-cash-flow multiple was 17.7x.

Analyst recommendations

Of the 37 analysts covering Twitter (TWTR), four gave it a “buy” recommendation, 14 recommended a “sell,” and 19 recommended a “hold.”

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Relative strength index

For the last 14 days, Twitter reported an RSI (relative strength index) of 63 compared to 50, 38, 41, and 83 recorded by Facebook, Amazon, eBay, and Yelp, respectively, during the same period. The RSI measures the change and speed at which stock prices move.

Moving averages

The moving average refers to the average price of a stock over a given period. On August 23, 2017, Twitter closed the trading day at $12.65. Based on this figure, here’s how the stock fared in terms of its moving averages:

  • 0.24% below its 100-day moving average of $17.00
  • ~5.8% above its 50-day moving average of $18.00
  • 6.0% above its 20-day moving average of $16.00
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MACD

The moving average convergence divergence (or MACD) refers to the difference between the long-term and short-term moving averages. Twitter’s MACD was -0.56 in the last 14 days.

Among its peers, Facebook, Amazon, eBay, and Yelp, reported MACD readings of ~2.6, ~-8.2, -0.16, and ~2.6, respectively.

Earnings and sales

Twitter’s EPS (earning per share) for 2016 resulted from total sales of $2.5 billion, a 1% annual decrease. Sales for 2017 are expected to range from ~$2.4 billion to ~$2.5 billion.

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