Twitter's (NYSE:TWTR) debut was met with exultation as jubilant investors bid the social-media microblogging site from its original IPO price of $26 per share to over $50 per share. Although the company's price has subsequently dropped, it appears the valuation is still expensive.
Twitter appears to be trapped in a classic "love the business, hate the price" situation: According to a recent Forbes article, the market values each Twitter monthly active user more than a Facebook or LinkedIn user although Twitter users provide less revenue.
However, Twitter isn't resting on its laurels. It has interesting prospects for user monetization including TV, news, and e-commerce.
Twitter CEO, Dick Costolo, has an ambitious goal of transforming Twitter into a "second TV screen" to provide over $1 billion of revenue by 2014. The recent hire of Vivian Schiller will bolster Twitter's news coverage going forward. Finally, the partnership with Starbucks with its "Tweet-a-coffee" campaign is a glimpse into how Twitter can enter the e-commerce market.
Unfortunately, those things are in the nascent phases and don't appear to be able to sustain the company's current market capitalization.
In the video, Jamal Carnette discusses Twitter's current valuation with Evan Niu, CFA.