Facebook and Twitter are the Two Highest-Profile Social Media Stocks. But One of Them Has a Clear Edge Right Now
They’re the two most recognizable social media platforms in America. But until two years ago, there was no comparison between the two social media stocks – Facebook (FB) was a far superior investment than Twitter (TWTR). Twenty-four months and countless Facebook scandals later, and FB vs. TWTR is now more of a toss-up to anyone trying to pick the best social media giant to invest in.
Since last July, when disappointing earnings triggered the biggest one-day loss of value in stock market history, Facebook stock is down more than 13%. Twitter stock has had its ups and downs too during that time, but it’s still up 22% in the last year, versus a mere 4.5% gain in FB. Going back further, TWTR is up 151% in the last two years, while Facebook has gained just 9.75%.
So, with the two stocks going in different directions, how you view them now may well depend on your investing style; a value investor might see FB as a bargain stock, while momentum investors would likely prefer TWTR’s chart.
Cabot Stock of the Week brings you:
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But let’s do a deeper dive on FB vs. TWTR to see which social media stock looks like the more viable long-term option.
FB vs. TWTR: Tale of the Tape
Trailing P/Es: FB 30, TWTR 13
Forward P/Es: FB 19, TWTR 36
Latest earnings growth: FB -48%, TWTR 1,018%
Latest sales growth: FB 27%, TWTR 18%
Cash per share: FB $17.03, TWTR $8.67
Institutional ownership: FB 74%, TWTR 70%
Going by those fundamentals, you could make the argument that FB stock is the better investment. It’s cheaper in terms of forward P/E, it’s growing sales slightly faster, and has nearly twice as much cash per share on hand for things like acquisitions, share buybacks and perhaps offering a dividend payment someday. But TWTR blows FB out of the water in terms of earnings growth, and Facebook’s EPS retreated by an alarming amount in the most recent quarter.
What about future growth? Twitter has the big bottom-line edge there too, while Facebook maintains better sales growth. In 2019, analysts foresee 25% sales growth and a 16.4% dip in earnings for Facebook; for Twitter, estimates come in at 17% sales growth with a whopping 195% EPS growth.
Taking all those fundamentals into consideration, TWTR appears to have the edge over FB. But what about the charts? Let’s look at their six-month charts to get a sense of their intermediate-term trajectories.
A month ago, you might have called this a dead heat. But then FB stock imploded, falling 11% in two weeks, and it hasn’t recovered since. TWTR stock, on the other hand, gapped up on earnings around the same time FB was plummeting, and has been in a nice holding pattern between 40 and 42 since – very encouraging action considering all the market volatility of late. If the market gets out of its current funk, chances are TWTR’s next break will be to the upside – and new highs.
Why TWTR is the Winner
Facebook has done real damage to its reputation over the last year-plus due its multiple scandals involving Russian hacks to sway political opinion among its users. Those incidents have eroded trust in the company, the platform, and Mark Zuckerberg himself, and management’s tone-deaf and insufficient responses to those scandals have only made matters worse. Meanwhile, aside from President Trump’s personal account (and depending on your political leanings), Twitter has mostly avoided major scandal. At this point, it may be the more trusted social media platform to the average American—if not the more universally recognized.
And that’s really the point: while Facebook has probably already passed the point of peak perception and recognition, both domestically and globally, Twitter has yet to reach its peak. And that means there’s a good chance TWTR stock has more room for growth than FB.
So, if I were to render a decision in FB vs. TWTR, I’d lean heavily towards the latter. To me, Twitter is essentially Facebook five years ago in terms of perception, reach, and growth potential. If you had bought Facebook stock five years ago, you’d be sitting on a 143% profit today. Over the next five years, I think Twitter stock has that kind of potential – or maybe better.
Investment analyst and Chief Analyst of Cabot Wealth Daily, Chris Preston brings you all the latest from the investing world. Sign up to get updates and breaking news delivered FREE to your inbox. Get unlimited access to our library of complimentary investing reports.Sign up now!
*This post has been updated from an original version.