Still kicking yourself for not getting into Twitter stock years ago when it went public? Don't. It's been dead money in the S&P 500.
Had you invested $10,000 in the short-messaging online service Elon Musk is infatuated with, your stake would only be worth $10,791 now. That's a pathetic 7.9% return from Twitter's first day of trading on Nov. 7, 2013. Just simply buying and holding the SPDR S&P 500 ETF Trust was a superior bet. The same $10,000 plunked down on the popular diversified market index is up more than 150% in that time. Now, your $10,000 on the S&P 500 would be worth $25,037 — or more than double what your Twitter shares would be worth.
And that's actually after the nearly 20% "Musk bump" in the stock. Shares of Twitter rallied on word the Tesla founder is now Twitter's second-largest shareholder. He's also said he'd like to buy the entire company.
"Twitter is no stranger to questions about corporate leadership and potential M&A activity, and Musk's involvement and actions could push the company to pursue other would-be acquisition options," said Scott Kessler analyst at Third Bridge in New York. "It's worth noting that Twitter was the focus of an activist effort just a couple of years ago."
Twitter: Lots Of Users, Light On Profit
Twitter is great at luring users. But it's just lousy at turning them into paying customers. And the bottom line is what matters most to S&P 500 investors now.
Just looking at the company's most recent results tells the story. Twitter reported 217 million daily active users by the end of 2021. That's a respectable number, although tiny next to Meta Platforms' 2.82 billion daily active users at the same time.
But the problem is apparent when it comes to profitability. Twitter only made an adjusted $165.3 million last year, says S&P Global Market Intelligence. That works out to less than a dollar a year in profit per user. Twitter's revenue per user is also only $23.40. That pales next to the Meta monetization machine. Last year, Meta made an adjusted $39.4 billion in profit. That means it made $13.97 in profit per user, or roughly 14 times more than Twitter.
Now you understand why shares of Meta Platforms are up more than 340% since Twitter has done basically nothing since going public.
Who's Betting On Twitter Stock In The S&P 500?
That, then, begs the question: How much could Twitter made if it simply matched Facebook's money-making methods? Assuming it could earn just $13 in profit per user, that would be a score of $2.8 billion or roughly $3.70 a share. A gain that big would be nearly 2,000% more than the adjusted 20-cents-a-share profit it made in 2021.
So, now you understand why investors seem so interested in piling into the shares. Musk is now the No. 2 holder of Twitter shares valued at $3.2 billion, or 9.6% of the company (although some reports put his stake higher). ETF giant Vanguard is still the top holder at 10.8% with 82 million shares. Twitter is a large position in two Vanguard ETFs, including Vanguard S&P 500 and Vanguard Total Stock Market. But some activist investors, too, are jumping in. Elliott Management owns 1.3% of the company and D.E. Shaw at 0.5%.
Timing is key with Twitter stock. Anyone who jumped in five years ago while shares were seriously languishing are up more than 235% since then. That tops the S&P 500 and Meta.
Patience, though, is wearing thin. S&P 500 analysts think Twitter shares will only be worth 44.40 each in 12 months. That's 7% lower than they are now. And more dead money is about the last thing Twitter investors are looking for after what they've been through.
Twitter Shares Disappoint In The S&P 500
They've lagged the S&P 500 and Facebook parent Meta Platforms
| Company | Symbol | Stock % ch. from TWTR's first day | % ch. past five years | $10,000 on Twitter's first day is now worth | What $10,000 invested five years ago is worth now |
|---|---|---|---|---|---|
| 7.9% | 235.5% | $10,791 | $33,553 | ||
| SPDR S&P 500 ETF Trust | 150.4% | 87.3% | 25,037 | 18,727 | |
| Meta Platforms | 343.2% | 49.5% | 44,317 | 14,952 |
