Better Buy: Facebook vs. Twitter

Better Buy: Facebook vs. Twitter

Posted On July 5, 2019 1:03 am

Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) have defined the social media sector since its early days. The two companies together pioneered many of the social media concepts that have become part of the mainstream lexicon, including trending topics, the news feed, and even “liking” something. Both companies are also among the biggest and most important intermediaries in the world as they serve as a source of news and information for billions of people as well as a medium of communication between friends, family, and colleagues.

However, while Facebook and Twitter have much in common as social media companies, the two stocks couldn’t be more different. Facebook started out relatively flat for the first 15 months following its 2012 IPO, but then enjoyed a five-year, roughly 800% stock price surge. It’s become one of the world’s most valuable companies as it built a near-monopoly in social media with the help of Instagram and WhatsApp, which it acquired in 2012 and 2014, respectively.

Twitter, on the other hand, enjoyed a 66% surge in the first few months following its 2013 IPO but has mostly floundered since then as a publicly traded company. It’s had numerous issues finding a reliable business model and growing its user base. The chart below shows how the two companies’ paths have diverged over the past 5 years.

Facebook has been no stranger to trouble over the last two years as it has dealt with a series of scandals, while Twitter has shown some signs of progress in its turnaround efforts. Let’s take a look at where each company stands today to see which is the better buy.

A tech giant at a crossroads 

Facebook’s business has size, reach, and profitability that’s essentially unrivaled in the world. As of its most recent quarter, the social network had 2.38 million monthly active users (MAUs) and its family of apps — including Instagram, WhatsApp, and Messenger — had 2.7 billion MAUs.

The advertising business built on its social network is also incredibly profitable with an adjusted operating margin of 42% in the first quarter and 45% last year.

Numbers like those illustrate Facebook’s dominance and help explain why it’s market cap is nearly $550 billion. That same dominance, however, has led to a slew of challenges…

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