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Downtown Josh Brown: Twitter Is No Facebook, But Still Has Huge Potential

Downtown Josh Brown: Twitter Is No Facebook, But Still Has Huge Potential

"Downtown" Josh Brown is the CEO of Ritholtz Wealth Management and was a guest on CNBC's "Halftime Report" Thursday to offer his take on Twitter Inc (NYSE: TWTR) after the company's fourth-quarter earnings report disappointed investors.

Brown acknowledged that he is still a shareholder of Twitter, and the unfortunate reality is there is "very little progress" in improving the business — but there is still underlying potential for improvements moving forward.

Brown continued that while it is nice for Twitter to show an uptick in daily active users and monthly active users, this is overshadowed by two aspects of the business plaguing the company.

First, the company's stock based compensation as a percentage of revenue is out of control and unheard of within the technology industry.

Second and perhaps more important is the fact that Twitter's advertising business failed to show signs of meaningful improvements despite the platform being front-and-center in the political environment.

"If you aren't minting money in that time frame I don't understand what you need to have that happen," he emphasized.

Even though Twitter's stock fell more than 10 percent on Thursday, Brown isn't looking to add to his position.

Why Not Sell?

Brown didn't indicate how much he paid for Twitter's stock, but he did say it is reasonable to assume like many other shareholders, his position is in the negative.

"The technicals on Twitter from short-term, intermediate-term, and long-term perspective are pretty terrible," he said. "I got involved with this when it became public. I was wrong from the start."

Brown went on to explain why he is holding on to the stock, based on the technicals. The fact that the stock didn't test new all-time lows on Thursday is a positive and it is possible that the earnings report and sell-off in the stock isn't as bad as prior quarters.

With that said Brown was then asked by CNBC's Scott Wapner what would it take for him to dump the stock for good.

Brown did acknowledge that his position is relatively small but that doesn't take away from the fact that he sees potential for the social media company moving forward.

He argued that Twitter was never meant to be like Facebook Inc (NASDAQ: FB), and many investors piled into Twitter making a mistake thinking it would indeed be the "next Facebook."

Twitter's value proposition can be extracted as part of a "deeper relationship" with a tech giant like Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL)'s Google unit.

Bottom line, Twitter's main advantage of Facebook is the real-time nature of the platform and ultimately a company can come along and "find a way to make that enormously profitable."


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