Ok, this will be short;
With its PE ratio under 18x (vs. Facebook’s 30x), Twitter is undervalued, IMO. For reference, Twitter doubled its active user growth rate last quarter, hence it’s a faster-growing yet less-monetized machine. Wall Street usually rewards the fast growers, turning a blind eye on the revenues (let alone, profits, if any!), but it is, for some reason, not the case here.
So this may be an opportunity for Alphabet to step in and snap up Twitter before it’s too late. As I stated countless times before, Google’s Search business and Twitter are very relevant, because they’re both real-time textual intent destinations, a very monetizable class with the right team and resources. Twitter clearly lacks it.
But of course, this is not the ideal time for such an acquisition due to high scrutiny on tech monopoly these days. That’s why Alphabet could have structured a deal like this by splitting up the company and easing the tension on its monopoly status. There would be three large chunks:
- Google Search
- Social Media (Youtube, Twitter, Google Photos)
- Other Bets
Other Bets could be bundled to either of them, but more likely to Search because it’s the real cash cow. In other words, spinning out Social Media under a new brand would be the solution, keeping Alphabet intact.
I can’t wait to see this happen! This is probably something Facebook would like to see as well, because there would be less scrutiny on them with a competitor as strong as the combined Youtube, Twitter, Google Photos.
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