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Howard Lindzon’s latest blog post about Tencent Holdings’ (OTCMKTS:TCEHY) misguided $2 billion investment in Snap (NYSE:SNAP) has to make long-time owners of Snap stock question their sanity for hanging on as it’s dropped from $20 to less than $7.
“Their [Tencent] $2 billion investment in Snapchat when the stock was at $12 now just looks sloppy as Snapchat bleeds money,” Lindzon wrote Oct. 10. “I am not sure if the markets are more worried about Tencent losing the $2 billion they invested in Snapchat or that they may buy the remaining 88 percent of it.”
Snapchat and Snap stock is in free fall making Twitter’s (NYSE:TWTR) 22% year-to-date return (through Oct. 9) look pretty darn good.
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Is Twitter a Buy?
Well, some thought it was before it announced second-quarter 2018 earnings in late July that included fewer monthly active users than expected. On that news, TWTR stock lost $13 in year-to-date gains and is down another $3 in the two-and-a-half months since.
As I write this, TWTR is down almost 5% in early trading. Not good if you’re Louis Navellier, an InvestorPlace contributor and longtime editor of several investment newsletters.
“What spooked investors was that Twitter had fewer monthly active users than expected,” Navellier wrote Sept. 20. “While the news had some shareholders running for the exits, I doubled down. I recommended it as a buy in my newsletters.”
That takes courage.
However, Navellier makes two good points about Twitter.
The first is that there are over 500 million tweets every day. Without Twitter, how are businesses and opinion-makers going to get their story out?
Facebook (NASDAQ:FB) is the obvious answer, but it’s got its own set of problems at the moment. Long-term, I’m a fan of Facebook stock, but it’s going to be a bumpy ride until Mark Zuckerberg and company figure out how to keep user data safe and secure.
InvestorPlace contributor Dana Blankenhorn believes we’ve reached peak Twitter and what comes next will have consequences for the social media platform’s stock.
I’m not so sure for the simple reason that nothing is waiting in the wings to replace it. People tend to be committed to something until a better alternative comes along. At this point, I don’t see one.
The second point that Navellier makes is that Twitter is finally profitable, delivering earnings surprises in three out of the last four quarters.