Conversations & Insights June 12, 2015

Twitter Needs Revenue, Not Just User Growth

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As Wall Street falls out of love with Twitter, NYU Stern Finance Professor Aswath Damodaran discusses why the decision to replace Dick Costolo was the right one. Twitter has a lot of potential according to Damodaran, just not under the current management who is stalling on converting users to revenue. Flattening user growth does not bother Damodaran, who says 300 million users is still a lot.

Damodaran evaluates other leading tech companies:

Apple: Valued at its full price, without the exponential upside it once had.

Amazon: Amazon’s margins will need to multiply by 8x to 9x before the company can break even.

Linkedin: This company is on Damodaran’s watch list.

Nike: A long-term investment that is never priced too low.

Tesla: Blessed by the incompetence of the competition (auto industry), this company should decide whether it is primarily an auto or battery producer.

Starbucks: Hides true costs by leasing stores. Taking leasing costs into account paints a less rosy picture.

Alibaba: Lack of transparency makes Damodaran uneasy.

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