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Facebook vs Twitter

August 21, 2014 | About:
cody56

cody56

1 followers

Facebook (FB) and Twitter (TWTR) are two of the largest social networking sites in the world with both sites ranking in the top 11 most visited sites in the world. Both companies have integrated their websites into the very fabric of the web. Opening their platforms for other to build on and allowing them to leverage both companies massive social data. Both companies have massive social data on all of us that is very valuable for potential advertisers.

Facebook Inc. (FB)

Facebook was founded by Mark Zuckerberg and his Harvard roommates as an online college directory. The idea spread to other Ivy League colleges throughout the United States. Once Facebook was open to high school students, the site grew like a wildfire spreading all over the U.S. and then abroad. Today Facebook has over 1 billion active users with 900 million of them on mobile devices. Since placing ads on the site, revenues have grown rapidly and massively. But Facebook generally has lower click-through rates than other major websites. Facebook has an average click-through rate of 0.04%, but on brand and product pages it has a reported click-through rate as high as 6%. After 11 years Facebook finally went public in 2012 at $104 billion, but it went horribly wrong. Their share price spent most of 2012 and 2013 in the trash so to speak. Right after going public Facebook acquired Instagram, a two-year-old photo sharing app that had no profit or revenue, at $1 billion. Two years later Facebook acquired WhatsApp for $19 billion. Facebook will pay $4 billion in cash, $12 billion in Facebook shares and $3 billion in restricted stock units for WhatsApp founders and employees that will be vested over the next 4 years.

Facebook valuation and ratios

Price to Earnings (P/E) 81.78
Price to Book (P/B) 10.57
Price to Sales (P/S) 19.55
Profit Margin 23%
Operating Margins 43%
Return on Equity 15.44%
Return on Assets 13.05%

For 2013,Facebook had revenues of $7.87 billion, annual profits of $1.5 billion, earnings per share of 60 cents and user growth of 3.4%. The company traded at 81 times its earnings but if it sold at the same P/E as the NASDAQ its share price would trade at about $13 per share. It is very clear that Facebook is massively overvalued and doesn't reflect reality at all. People are paying up for the potential that growth will somehow reach the current valuation for Facebook.

For the six months ending in June 2014, revenues increased 66% to $5.4 billion and net income increased from $549 million to $1.13 billion. Revenues reflect the rest of the global increase of 38% to $1.37 billion while the United States segment increased 38% as well to $1.13 billion.

Mobile is driving 53% of Revenues and Earnings.

Balance Sheet

2013

31/12

2012

31/12

2011

31/12

2010

31/12

Total Current Assets 13070 11267 4604 2246
Cash and Short Term Investments 11449 9626 3908 1785
Cash 1044 - - -
Cash & Equivalents - 2384 1512 1785
Short Term Investments 10405 7242 2396 -
Total Receivables, Net 1160 1170 547 373
Accounts Receivables - Trade, Net 1109 719 547 373
Total Inventory - - - -
Prepaid Expenses 461 471 149 88
Other Current Assets, Total - - - -
Total Assets 17895 15103 6331 2990
Property/Plant/Equipment, Total - Net 2882 2391 1475 574
Property/Plant/Equipment, Total - Gross 4142 3273 1925 820
Accumulated Depreciation, Total -1260 -882 -450 -246
Goodwill, Net 839 587 82 37
Intangibles, Net 883 801 80 59
Long Term Investments - - - -
Note Receivable - Long Term - - - -
Other Long Term Assets, Total 221 57 90 74
Other Assets, Total - - - -
Total Current Liabilities 1100 1052 899 389
Accounts Payable 268 234 234 104
Payable/Accrued - - - -
Accrued Expenses 555 277 239 137
Notes Payable/Short Term Debt - - - -
Current Port. of LT Debt/Capital Leases 239 365 279 106
Other Current liabilities, Total 38 176 147 42
Total Liabilities 2425 3348 1432 828
Total Long Term Debt 237 1991 398 367
Long Term Debt - 1500 - 250
Capital Lease Obligations 237 491 398 117
Total Debt 476 2356 677 473
Deferred Income Tax - - - -
Minority Interest - - - -
Other Liabilities, Total 1088 305 135 72
Total Equity 15470 11755 4899 2162
Redeemable Preferred Stock, Total - - - -
Preferred Stock - Non Redeemable, Net - - 615 615
Common Stock, Total - - - -
Additional Paid-In Capital 12297 10094 2684 947
Retained Earnings (Accumulated Deficit) 3159 1659 1606 606
Treasury Stock - Common - - - -
ESOP Debt Guarantee - - - -
Unrealized Gain (Loss) - - - -
Other Equity, Total 14 2 -6 -6
Total Liabilities & Shareholders' Equity 17895 15103 6331 2990
Total Common Shares Outstanding 2547 2372.71 2138.09 2138.09
Total Preferred Shares Outstanding - - 543 -

Cash Flow Statements

2013

31/12

2012

31/12

2011

31/12

2010

31/12

Period Length: 12 Months 12 Months 12 Months 12 Months
Net Income/Starting Line 1500 53 1000 606
Cash From Operating Activities 4222 1612 1549 698
Depreciation/Depletion 1011 649 323 139
Amortization - - - -
Deferred Taxes -37 -186 - -
Non-Cash Items 1072 1587 221 23
Cash Receipts - - - -
Cash Payments - - - -
Cash Taxes Paid 82 53 197 261
Cash Interest Paid 38 38 28 23
Changes in Working Capital 676 -491 5 -70
Cash From Investing Activities -2624 -7024 -3023 -324
Capital Expenditures -1362 -1235 -606 -293
Other Investing Cash Flow Items, Total -1262 -5789 -2417 -31
Cash From Financing Activities -667 6283 1198 781
Financing Cash Flow Items -280 -1624 603 115
Total Cash Dividends Paid - - - -
Issuance (Retirement) of Stock, Net 1504 6777 1026 506
Issuance (Retirement) of Debt, Net -1891 1130 -431 160
Foreign Exchange Effects 8 1 3 -3
Net Change in Cash 939 872 -273 1152

Twitter Inc. (TWTR)

Twitter was founded by Jack Dorsey, Evan Williams, Biz Stone and Noah Glass in 2006. Twitter is a social network and micro blogging service. It enables users to send Tweets, which are text messages that have a 140-character limit. Since going live in mid-2006 the service has had explosive growth spread all over the country and the world. Twitter's service has had massive effects on the culture of the U.S. and the rest of the world. Its platform has been used by people from the Middle East to other areas of the world to organize uprisings and start revolutions. These uprisings and revolutions have been dubbed the Twitter Revolution, which has led many countries to censor the site or even ban it. After six years Twitter went public in 2013 and its market cap was valued at $34 billion after the first day of trading.

Twitter valuation and ratios

Price to Earnings (P/E) 31
Price to Book (P/B) 9.89
Price to Sales (P/S) 47.37
Profit Margin

62%

Operating Margin -95.69%
Return on Equity ??
Return on Assets ??

Twitter average ad rates declined by 18% in Q4 2013, down 81% since Q1 2012. It's had Q4 revenues of $243 million, but the company reported a $3.41 earning per share loss and user growth of 3.8%. The company's full year revenue was $665 million and a full year loss of $1.41 earnings per share. Twitter stock trades at 31 times its no essence earnings. I can not value Twitter that has no earnings. It sells at unbelievably unrealistic multiples that are not based in reality.

For the three months ending in March, revenue increased from $114 million to $250 million and net loss increased from $27 million to $132 million. Revenues reflect an  increase from $89 million to $180 million in the United States segment and an increase from $24 million to $70 million in the international segment. Other sales and marketing increase from $30 million to $78 million.

Balance Sheet

2013

31/12

2012

31/12

2011

31/12

2010

31/12

Total Current Assets 2574.68 554.47 596.07 -
Cash and Short Term Investments 2234.05 424.86 549.54 -
Cash 164.13 18.93 20.66 -
Cash & Equivalents - - - -
Short Term Investments 2069.92 405.93 528.88 -
Total Receivables, Net 247.33 112.16 39.83 -
Accounts Receivables - Trade, Net 247.33 112.16 39.83 -
Total Inventory - - - -
Prepaid Expenses 31.18 15.97 6.7 -
Other Current Assets, Total 62.12 1.48 - -
Total Assets 3366.24 831.57 720.67 -
Property/Plant/Equipment, Total - Net 332.66 185.57 61.98 -
Property/Plant/Equipment, Total - Gross 499.73 258.81 84.54 -
Accumulated Depreciation, Total -167.06 -73.24 -22.56 -
Goodwill, Net 363.48 68.81 36.76 -
Intangibles, Net 77.63 3.75 6.42 -
Long Term Investments - - - -
Note Receivable - Long Term - - - -
Other Long Term Assets, Total 17.8 18.96 19.45 -
Other Assets, Total - - - -
Total Current Liabilities 225.43 109.88 47.74 -
Accounts Payable 27.99 8.43 4.54 -
Payable/Accrued - - - -
Accrued Expenses 86.32 43.33 15.24 -
Notes Payable/Short Term Debt - - - -
Current Port. of LT Debt/Capital Leases 87.13 48.84 22.69 -
Other Current liabilities, Total 23.99 9.29 5.27 -
Total Liabilities 416.23 207.2 87.39 -
Total Long Term Debt 110.52 65.73 21.1 -
Long Term Debt - - - -
Capital Lease Obligations 110.52 65.73 21.1 -
Total Debt 197.65 114.57 43.8 -
Deferred Income Tax 59.5 12.16 13.62 -
Minority Interest - - - -
Other Liabilities, Total 20.78 19.44 4.93 -
Total Equity 2950.01 624.36 633.28 -
Redeemable Preferred Stock, Total - 37.11 0.05 -
Preferred Stock - Non Redeemable, Net - 835.43 835.07 -
Common Stock, Total - - - -
Additional Paid-In Capital 3944.95 101.79 68.1 -
Retained Earnings (Accumulated Deficit) -994.63 -349.3 -269.9 -
Treasury Stock - Common - - - -
ESOP Debt Guarantee - - - -
Unrealized Gain (Loss) - - - -
Other Equity, Total -0.32 -0.66 -0.03 -
Total Liabilities & Shareholders' Equity 3366.24 831.57 720.67 -
Total Common Shares Outstanding 569.92 474.7 474.7 -
Total Preferred Shares Outstanding - - - -

Cash Flow Statements

2013

31/12

2012

31/12

2011

31/12

2010

31/12

Period Length: 12 Months 12 Months 12 Months 12 Months
Net Income/Starting Line -645.32 -79.4 -128.3 -67.32
Cash From Operating Activities 1.4 -27.93 -70.6 -48.74
Depreciation/Depletion 110.89 72.51 24.19 10.36
Amortization - - - -
Deferred Taxes -8.9 -1.1 -2.25 -0.22
Non-Cash Items 606.09 33.4 64.95 7.6
Cash Receipts - - - -
Cash Payments - - - -
Cash Taxes Paid 2.39 - - -
Cash Interest Paid 6.85 3.13 1.46 0.24
Changes in Working Capital -61.36 -53.35 -29.19 0.84
Cash From Investing Activities -1306.07 49.44 -324.88 48.97
Capital Expenditures -75.74 -50.6 -11.55 -5.69
Other Investing Cash Flow Items, Total -1230.32 100.04 -313.33 54.67
Cash From Financing Activities 1942.18 -37.12 480.21 114.31
Financing Cash Flow Items -14.64 - - -
Total Cash Dividends Paid - - - -
Issuance (Retirement) of Stock, Net 2027.26 2.31 495.31 115.93
Issuance (Retirement) of Debt, Net -70.44 -39.44 -15.1 -1.61
Foreign Exchange Effects 0.17 -0.05 0.01 0.01
Net Change in Cash 637.68 -15.67 84.74 114.56

Compared valuation of Facebook and Twitter

Facebook had full year revenues of $7.87 billion and Twitter had $665 million. Facebook had earnings per share of 60 cents why'll Twitter had a loss of $1.41 per share. Both companies are overvalued Facebook trades at 81 times earning and Twitter trades at 31 times earnings.

Facebook and Twitter statistics on users and ratios

Ratios and User Statistics Facebook Twitter
Market Cap. 134 billion 29 billion
Price to Earnings (P/E) 117.24 264.29
Price to Book (P/B) 11.64 9.89
Price to Sales (P/S) 22.95 47.37
Profit Margins 19.06% -97.06%
Operating Margins 37.11% -95.69%
Q4 User Growth 3.4% 3.8%
Mobile Advertisements Market Share 15.8% 1.9%
Average Time on The site 22:52 min. 12:51 min.

Facebook and Twitter valuations today are massively out of whack and not in reality. I have nothing really to value Facebook with, but worse I have nothing at all to value Twitter. It makes no sense for these companies to sell at the multiples they are trading at. People are hoping, praying and falsely believing that these companies will grow into these valuations. Both companies could double their earnings and revenues for the next 50 years and wouldn't even come anywhere close to their current valuations of $134 billion and $29 billion. People have been unrealistic with the current valuations they have placed on these companies, which can never live up to these valuations. If you are buy these companies' shares or on TV preaching the wonders and growth potential of these companies you are a speculator. Facebook and Twitter are not investment but speculations and no intelligent investor should go near these companies no matter what anyone on Wall Street says. But if you have to invest in one I go with Facebook since it has a current ratio of 12% and Twitter has a current ratio of 6.6%. Also Facebook is growing revenues and earnings at a faster and higher rate than Twitter. Facebook's mobile ad platform is working; so far this year its revenue from ads has been $1.5 billion compared to Twitter $450 million.


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