Breakout

Twitter a ‘short,’ shares still overvalued: Jackson

Breakout

Twitter’s (TWTR) magnificent rise and precipitous fall to below IPO pricing has been a wild ride. Investors of the stock aren’t amused, but some are wondering whether a floor has been set for the stock at these levels. Eric Jackson of Ironfire Capital isn’t so sure.

Although Jackson believes the company isn’t “doomed,” in the attached video he says the Twitter story is going to get worse, and he’s putting his money where his mouth and is shorting the stock. “It has a lot lower to go before it bottoms out, and then people get overly negative, overly pessimistic and then Twitter can possibly surprise them on the upside. But I don't think we're there yet.”

What’s holding Twitter back from justifying its valuation, in Jackson’s mind, is users – or lack thereof. "It's a user growth issue,” he says, noting “Wall Street is now waking up to the fact that Twitter is not now, or ever going to be Facebook (FB).” Jackson says investors rewarding Twitter shares with a “generous valuation” was pure fallacy without the numbers to back it up.

For Jackson, over the last two Twitter earnings calls investors are finally coming to grips with the fact that Facebook-like explosive growth isn't going to happen. "It got way overvalued, and now we're seeing an adjustment. It's a great service, I'll continue to use it, but it's not worth 35 times revenue."

2014 has been a year full off tech IPOs, and it appears by recent price action that appetite for companies like King (makers of Candy Crush Saga) and Grubhub.com is waning without the growth numbers to back it up. With Alibaba’s IPO coming up in the near future, it will be interesting to see if Twitter’s rise and fall with will be the recipe for investor pain to come with future tech offerings.

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