FANG(+T) tech bubble: Twitter loses less money than it thought, jumps 10% pre-market

On Thursday, Twitter reported a third-quarter loss of $21 million, or 3 cents per share. Excluding one-time items, the company earned 10 cents per share in the latest quarter.

The results exceeded Wall Street expectations. The average estimate of 12 analysts surveyed by Zacks Investment Research was for earnings of 6 cents per share.

The company posted revenue of $589.6 million in the period, down 4 percent from a year earlier but in line with forecasts.

Twitter had 330 million monthly users, up 1 percent from the second quarter.

Associated Press, October 26, 2017

Another social media company that has “jumped the shark” is up 10% in pre-market trading. An unprofitable company jumping 10% on the report of lower than expected losses (not gains) sounds a lot like the 2001 dot com bubble.

I don’t know what investors are predicting in terms of growth for social media, but I suspect we’ve reached the peak long ago.  You can’t expect any more new, unique users if everyone in the world already knows about the service already, and you can’t milk existing users for more ad revenue when their tolerance with the service is already low.

A rise in the monthly users metric is useless if it can’t track the number of unique persons using the accounts.

Increased bot usage and multiple account holders resulting in more trolling and trending algorithm manipulation, rising awareness of the ills of social media, censorship campaigns and invasive privacy practices that have prompted the rise of freer alternatives, more advertising restrictions in their attempt to curb “political influence”, a debt-fueled stock bubble about to unravel — all these signs point to an inevitable downward trend for social media companies.

If Twitter at its peak was expecting net losses and increased debt, then the future holds bigger losses and more debt.

It’s a pity that investors can’t see this. There is too much cheap debt flying around artificially inflating the market to have the share price reflect closer to the fundamental value: $0.

 

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