Why I Rank Twitter As CES 2014's Top Stock

Of all the companies at this year's Consumer Electronics Show, Twitter (NYSE: TWTR  ) ranks as my top stock pick. Why? Pervasiveness. The microblogger was, variously, my breaking news source, my go-to for connecting with colleagues and friends, and my broadcast platform.

Which, of course, is exactly the way CEO Dick Costolo wants it. "We think of [Twitter] as an indispensable companion to life in the moment," he saidduring the "Brand Matters" panel discussion at CES. You know what? He's right.

salesforce.com's ExactTarget marketing platform tracked the comings and goings on social media during CES and found 219,000 mentions of the hashtag #CES2014 before the show began, with 500 more coming in each minute during Monday's Press Day events. ExactTarget tracked 1.75 #CES2014 tweets per second on Day 2, while Michael Bay's walking off stage at Samsung's Day 1 keynote was still a hot topic on Day 3.

Hashtags are used across all social media to categorize comments or start a discussion thread. But really, they're a byproduct of Twitter, created several years ago to help users make sense of the vast sea of jokes, comments, GIFs, pitches, and observations appearing in their feeds.

Twitter is also cross-cultural in ways that other social networks aren't. In November, Viacom's (NASDAQ: VIAB  ) Comedy Central ordered a full 40 weeks of the new late-night hit @Midnight, in which host Chris Hardwick has comedians lampooning all manner of ridiculousness from social media. My favorite segment -- "Hashtag Wars," in which the guests construct funny titles to fit a hashtag -- starts on the show and continues on Twitter:

Comedy Central @Midnight reveals how Twitter has changed how we interact with culture. Sources: Twitter and Comedy Central/Viacom.

Skeptical investors will note that Twitter stock already commands a $31 billion market cap despite earning just $534.5 million in revenue over the trailing 12 months. Worse, the company trades for close to 60 times sales, an outrageous multiple when you look at peers Facebook and LinkedIn -- which as of this writing trade for 20 and 18 times sales, respectively.

But is Twitter stock really so overvalued? Can we not see this as a $100 billion company at some point? I can, especially when you consider that Google says that brand advertising tied to TV accounts for some $200 billion in spending. Notably, Twitter is in deals with Nielsen Holdings for measuring audience engagement and Comcast for improving the viewing experience. We wouldn't be seeing these sorts of partnerships if Twitter hadn't proved itself to be the sort of indispensable partner I found it to be during this year's CES.

Do you agree? What has your experience with Twitter been like? Leave a comment below let us know what you think of the service, and whether you would buy, sell, or short the stock at current prices.

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  • Report this Comment On January 12, 2014, at 1:29 PM, ValueinvestorEU wrote:

    Twitter is not "earning" 535 million USD. I wouldnt phrase it like that. they got revenue of 535m USD. but they lose money.

    And of course its overvalued, not only is it overvalued. it's becoming frightening that anyone can even argue otherwise.

    For me its beyond debatable if twitter is overvalued or not.

    Prices are too high compared to google. To little return for customers

    They are valued at 60 times sales, and thats sale that will almost stop growing once the "mobile" effect has fully run its course. You can only slap on ads on the mobile platform for a 1 off growth right?

    I dont mean to sound negative, but giving any kind of positive wipe about twitter as an investment is leading some retail investors to burn their money..

  • Report this Comment On January 12, 2014, at 2:14 PM, oatmealblues wrote:

    I guess this writer would be a genius if he is right. Forgettable if he is wrong. What does he have to lose? My guess is this could be one of the biggest losers for the year rather than the big gainer.

    This is looking like the fools are looking for anything to publish to get some money coming in. Maybe we need to be investing in the fools if there is such a company.

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