They’re the two most recognizable social media platforms in America; let’s do a deep dive on Facebook (FB) vs. Twitter (TWTR) to see which social media stock looks like the more viable long-term investment option, explains Chris Preston, investment analyst and editor of Cabot Wealth Network.
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But until two years ago, there was no comparison between the two social media stocks – Facebook (FB) was a far superior investment than Twitter (TWTR). Twenty-four months and countless Facebook scandals later, and FB vs. TWTR is now more of a toss-up to anyone trying to pick the best social media giant to invest in.
Since last July, when disappointing earnings triggered the biggest one-day loss of value in stock market history, Facebook stock is down more than 13%. Twitter stock has had its ups and downs too during that time, but it’s still up 22% in the last year, versus a mere 4.5% gain in FB. Going back further, TWTR is up 151% in the last two years, while Facebook has gained just 9.75%.
So, with the two stocks going in different directions, how you view them now may well depend on your investing style; a value investor might see Faebook as a bargain stock, while momentum investors would likely prefer Twitter's chart.
But let’s do a deeper dive on Facebook vs. Twitter to see which social media stock looks like the more viable long-term option.
* Facebook's trailing p/e is 30, while Twitter's is 13. Facebook's forward p/e is 19, while Twitter's is 36.
* Facebook's latest earnings growth is a loss of 48%; Twitter's is a gain of 1,018%
* Facebook's latest sales growth is 27%, while Twitter's is 18%
* Facebook's cash per share is $17.03, while Twitter's is $8.67
Going by those fundamentals, you could make the argument that Facebook stock is the better investment. It’s cheaper in terms of forward P/E, it’s growing sales slightly faster, and has nearly twice as much cash per share on hand for things like acquisitions, share buybacks and perhaps offering a dividend payment someday.
But Twitter blows Facebook out of the water in terms of earnings growth, and Facebook’s EPS retreated by an alarming amount in the most recent quarter.
What about future growth? Twitter has the big bottom-line edge there too, while Facebook maintains better sales growth. In 2019, analysts foresee 25% sales growth and a 16.4% dip in earnings for Facebook; for Twitter, estimates come in at 17% sales growth with a whopping 195% EPS growth.
A month ago, you might have called this a dead heat. But then FB stock imploded, falling 11% in two weeks, and it hasn’t recovered since.
TWTR stock, on the other hand, gapped up on earnings around the same time FB was plummeting, and has been in a nice holding pattern between 40 and 42 since — very encouraging action considering all the market volatility of late. If the market gets out of its current funk, chances are TWTR’s next break will be to the upside — and new highs.
Facebook has done real damage to its reputation over the last year-plus due its multiple scandals involving Russian hacks to sway political opinion among its users. Those incidents have eroded trust in the company, the platform, and Mark Zuckerberg himself, and management’s tone-deaf and insufficient responses to those scandals have only made matters worse.
Meanwhile, aside from President Trump’s personal account (and depending on your political leanings), Twitter has mostly avoided major scandal. At this point, it may be the more trusted social media platform to the average American—if not the more universally recognized.
And that’s really the point: while Facebook has probably already passed the point of peak perception and recognition, both domestically and globally, Twitter has yet to reach its peak. And that means there’s a good chance TWTR stock has more room for growth than FB.
So, if I were to render a decision in FB vs. TWTR, I’d lean heavily towards the latter. To me, Twitter is essentially Facebook five years ago in terms of perception, reach, and growth potential.
If you had bought Facebook stock five years ago, you’d be sitting on a 143% profit today. Over the next five years, I think Twitter stock has that kind of potential — or maybe better.
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