Twitter's surge revives valuation debate

Wed Jul 30, 2014 4:37pm EDT
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By Supantha Mukherjee

(Reuters) - The surge in Twitter Inc's (TWTR.N: Quote) stock has revived debate about whether it warrants a valuation five times that of Facebook Inc (FB.O: Quote), its biggest rival in social media.

Twitter reported on Tuesday that its active users jumped 24 percent to 271 million in the second quarter. That pales when compared with Facebook's 1.3 billion.

Even so, Twitter's shares were trading at about 200 times forward earnings on Wednesday, against Facebook's 39.4 times, according to Thomson Reuters StarMine. If Facebook was trading at Twitter's valuation, it would be worth nearly $1 trillion.

Twitter's shares finished almost 20 percent higher at $46.30, giving the company a market value of about $27.3 billion. The stock notched its biggest single-day gain since going public in November, and its third-biggest daily volume with almost 116 million shares changing hands.

Active users of Twitter increased more than expected in the quarter as the micro-messaging service introduced product tweaks and services, many built around the soccer World Cup.

Advertising revenue more than doubled to $277 million in the three months ended June 30.

The results were good, Pivotal Research Group analyst Brian Weiser wrote in a research report, but they did not warrant a nearly 30 percent rise in the stock price.

Weiser joined the few analysts who have a "sell" rating on the stock, cutting his recommendation from "hold."   Continued...

The Twitter logo is displayed on the floor of the New York Stock Exchange, November 8, 2013. REUTERS/Brendan McDermid