Why Facebook Is Still The Better Bet, Even After Twitter's Spectacular Results
With Twitter Inc (NYSE: TWTR) reporting much better than expected results recently, the never-ending debate on the Street regarding which is a better stock – Twitter or Facebook Inc (NASDAQ: FB) – has become more heated.
Daniel Niles from AlphaOne Capital was on CNBC Tuesday, February 10 to discuss his pick among the two.
Which Is A Better Bet Right Now?
“With investing, it’s all about risk and rewards,” Niles said. “So, both companies are at exciting points in their development in that both are going after video right now. But when you look at valuations relative to their growth, Twitter is growing about twice as fast as Facebook; they grew their revenues at 97 percent year-over-year in Q4.”
He continued, “So, obviously terrific revenue growth. Facebook grew at 49 percent. But then when you look at the multiples, Twitter is trading at about 130 times P/E – you get Facebook at 38 times.
“Given the difference in the valuation, which is 3.5 times greater for Twitter relative to their growth which is about 2 times faster, I think you have to give the edge to Facebook right now on a risk-reward basis.”
Are You Still Short Twitter And Long Facebook?
“Not anymore. We have been short it [...] but we ended up covering in early December, and we are long Facebook and we continue to like that. We may look at some point at actually buying Twitter, but it would be a much smaller position than Facebook, just given we think that Facebook has better risk-reward.”
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