W***n
发帖数: 11530 | 1 If Microsoft Overpaid for LinkedIn, Then Twitter Is Way Overpriced
Twitter is trading for 5 times the multiple Microsoft paid for LinkedIn
Adam Levy
Sep 9, 2016 at 1:06PM
When Microsoft (NASDAQ:MSFT) decided to plunk down $26.2 billion for
LinkedIn (NYSE:LNKD), most analysts agreed it was a steep price for the
Redmond-based company to pay. Not only was it a 50% premium over the stock's
price at the time, it was 91 times the company's trailing EBITDA through
the first quarter of the year. When LinkedIn reported its second quarter
earnings results, it revealed Microsoft paid just 63 times the company's
trailing-12-month EBITDA.
Twitter (NYSE:TWTR) is now the biggest social media company tied to
acquisition rumors, and those rumors seem to be the only positive factor
driving up the company's stock price. Co-founder Evan Williams recently made
a comment, or lack thereof, that led investors to believe the board was
more open to considering a buyout, sending the stock higher last week.
But Twitter already trades for a premium valuation. Any company looking to
acquire it would likely have to fork out even more than the company's
current $13.7 billion market cap. At its current price, however, Twitter is
trading for almost 300 times its trailing-12-month EBITDA. Does Twitter
really deserve 5 times the multiple Microsoft paid for LinkedIn?
A look at the numbers
Both Twitter and LinkedIn use considerable amounts of stock-based
compensation to make their adjusted EBITDA margins look good. They aren't
the only tech companies that use stock-based compensation and report non-
GAAP earnings results, but they're both heavily reliant on it. Here's what
Twitter and LinkedIn's EBITDA look like over the trailing 12 months with and
without stock-based compensation included.
Company
Adjusted EBITDA
Stock-Based Compensation
EBITDA
Market Value
Twitter
$688.6 million
$642.8 million
$45.9 million
$13.7 billion
LinkedIn
$971.1 million
$552.7 million
$418.4 million
$26.2 billion
Data source: Company financial reports.
Nearly all of Twitter's adjusted EBITDA comes from discounting stock-based
compensation, while it accounts for more than half of LinkedIn's. These are
real expenses even if they're not cash expenses, and thus need to be
considered by investors.
Using adjusted EBITDA numbers, Twitter's EBITDA multiple is just 20 times
and LinkedIn's is 27 times. But those numbers skyrocket when you factor in
stock-based compensation. With Twitter using more stock-based compensation
than LinkedIn, it becomes significantly more expensive than Microsoft's
latest acquisition using an EBITDA multiple.
Will Twitter grow faster?
The typical reason the market assigns a higher earnings multiple to one
stock over another is that it expects the higher-priced company to grow its
earnings faster. Twitter is finally posting positive EBITDA numbers in 2016,
and analysts think there's plenty of growth ahead. With an EBITDA of just $
45.9 million over the last 12 months, it'd take less of an absolute increase
to quadruple its EBITDA than LinkedIn's EBITDA, which is 9 times the size.
But analysts are expecting LinkedIn's EBITDA to grow to $1 billion this year
, nearly 4 times its EBITDA last year. Twitter, by comparison, expects an
adjusted EBITDA margin between 26% and 27% for the year. With analysts
expecting total revenue around $2.56 billion for 2016, that works out to $
678 million in adjusted EBITDA at the midpoint of Twitter's guidance.
That's actually a decrease in adjusted EBITDA from the trailing 12 months,
but that's due to less reliance on stock-based compensation. Stock-based
compensation expense fell 11% through the first half of the year.
But Twitter is coming up on the anniversary of a big round of job cuts, and
its third-quarter forecast for stock-based compensation ($165 million to $
175 million) is mostly above what it paid out in the third quarter last year
($165.9 million).
What's more, Twitter is forecasting another quarter of negative EBITDA, with
stock-based compensation expense outpacing its adjusted EBITDA expectations
($135 million to $150 million). With little revenue growth, little EBITDA
margin expansion, and little change in stock-based compensation, there's no
reason to believe Twitter will show nearly as much growth in EBITDA as
LinkedIn.
The potential might be there, but the company still isn't executing on that
potential. With the stock currently trading around 300 times its EBITDA, it
seems way overpriced compared to LinkedIn. And remember, the LinkedIn
acquisition was deemed quite expensive. |
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