Last week was a good one for the new wave of dot-com darlings. Shares of Groupon (GRPN +1.52%), Facebook (FB +0.76%), and Twitter (TWTR +0.00%) posted weekly gains of 13%,11%, and 31%, respectively. It was a welcome contrast to the Nasdaq's 1.5% slide.
Groupon and Twitter posted double-digit percentage gains after kind analyst words. Facebook got a boost after it was announced it'd be inducted into the S&P 500.
Groupon, Facebook, and Twitter went public in 2011, 2012, and 2013, respectively. Groupon and Facebook would go on to lose half of their value -- and in Groupon's case far more than that -- before bouncing back. Twitter investors haven't had to suffer the buyer's remorse that accompanies a broken IPO.
The nimble online titans have become investor faves at a time when many traditional companies are struggling for growth. Groupon, Facebook, and Twitter happen to be in the right place at the right time as advertisers are starting to follow consumers online.
Facebook and Twitter are simply getting better at monetizing their traffic, particularly when it comes to mobile. Groupon's making some headway there, but its turnaround has rested primarily on its ability to move beyond the flash sales of local experiences to selling physical goods at outlet pricing. Groupon has also cashed in on its rich relationships with small local businesses to expand its offerings.
The near-term prospects are pretty bright for all three companies. They are all expected to post double-digit percentage revenue gains next year. Twitter is the only one that isn't likely to be profitable, but it's also the one growing the fastest. Analysts are holding out for a 75% surge in revenue next year as it begins to take on more advertising. As long as the move doesn't result in too much clutter in the feeds, users can't complain. It's a free service, after all.
Facebook's revenue growth is expected to decelerate to 32% next year, with earnings climbing slightly faster at a 35% rate. The push into video ads could be a difference-maker for the leading social networking site.
Then we have Groupon, which has quietly mounted a pretty impressive comeback. It's profitable. It's growing. It may be the slowest grower of the three with its 15% top-line forecast for 2014, but earnings are expected to nearly triple to $0.25 a share.
The recent rallies in all three names will naturally lead worrywarts to argue that the stocks are overvalued, but rolling growth companies with wide popularity and scalable models will always be worthy of healthy market premiums.
