Twitter Inc. (TWTR, Financial) is undoubtedly facing pressure from investors who fear the social media giant will suffer a fate similar to Facebook's (FB, Financial).
Twitter lost 12% of the value of its stock in trading yesterday. The loss raises the specter that the company is just as vulnerable as Facebook to data licensing and privacy concerns because of its hold on large swaths of private data. In its hunt for more advertising dollars, Twitter may also be at risk.
Over the last week or two, the markets have been wary of this, marking across-the-board selloffs of Twitter and other high-flying tech stocks like Apple (AAPL, Financial), Alphabet (GOOGL, Financial), Netflix Inc. (NFLX, Financial) and Amazon (AMZN, Financial). Netflix and Amazon were down by more than 5% in late morning trading. Facebook stabilized after a rough several days, up 1% to $154 a share. Twitter slid almost 1% at under $29 a share to reverse its position by the lunch hour.
Privacy concerns
It’s easy to see why Twitter would be next in the line of fire. Just like Facebook, it collects massive amounts of consumer data and uses its reach to draw users. Last week, Facebook faced an avalanche of criticism when it was revealed it had compromised the personal data of more than 50 million users via a British political consulting firm.
Just like Facebook, Twitter was in hot water last year when it was discovered that Russian operatives had purchased advertisements aimed at swaying the 2016 presidential election. Just like Facebook, the heads of Twitter and their lawyers were hauled into congressional hearings to explain what happened. To regain public trust, Twitter implemented a series of fact checks to verify users' personal accounts.
In February, Twitter saw 4% year-over-year growth in the number of monthly active users to 330 million, while daily active users were up 12%. It was the company’s fifth quarter of consecutive growth.
The company has a market cap of $21 billion, which has been growing since it went public in 2012.
Flying high
Just under two months ago, Twitter was flying high. In early February, the company posted its first-ever profit, causing its stock to rise 23%. In the final months of the year, Twitter posted a net income of $91 million and earnings per share of 19 cents, which compared to a net loss of $167 million and a loss per share of 23 cents in the fourth quarter last year.
The company’s growth in revenue per share has been 4.4% over the last five years.
Growth in both its advertising and “data licensing and other” segments fueled Twitter’s fourth-quarter earnings results. Overall revenue increased 2% year over year to $732 million. Data licensing and other also grew 10% to $87 million, and advertising revenue increased 1% to $644 million.
Twitter has a price-book ratio of 4.78. Its price-sales ratio of 7.24 is close to a two-year high. At year-end, its balance sheet held $4.4 billion in cash. At the end of the third quarter, it had $161 billion in long-term debt.
