Twitter (NYSE: TWTR) is too sleazy and controversial for the Walt Disney Co. (NYSE: DIS) to touch.
Executives at the Magic Kingdom want nothing to do with Twitter even though it has 313 million users; and generated $2.476 billion in revenue during second quarter 2016. Bloomberg reported that Disney CEO Bob Iger was worried that Twitter’s reputation as a venue for bullying, racism, bigotry, sexual misconduct and other bad behavior would tarnish the Disney brand.
This seems to confirm what more than a few of us suspect, Twitter is fast becoming a sort of social media sewer. Much of what is tweeted there is so vulgar and offensive nobody wants anything to do with it.
Not even a man who was willing to shell out $4 billion for Marvel Comics. Marvel is the home of such dark and violent superheroes as Wolverine, The Punisher and Deadpool. Yet the man who bought it is bothered by what goes on at Twitter.
Why Disney said No to Twitter
One reason why Iger is afraid to touch Twitter is some of the brain-dead content gets tweeted out. A perfect example is this post from the Sheriff of Milwaukee County:
“It’s incredible that our institutions of gov, WH, Congress, DOJ, and big media are corrupt & all we do is bitch. Pitchforks and torches time.”
No this is not imaginary a high-ranking law enforcement officer in a major metropolitan area is urging violence, because he does not like the way the election is going. If that does not demonstrate everything that’s wrong with Twitter, I don’t know what does.
After seeing that it is easier to see Disney is running away from Twitter. Some of this content is positively pathetic. Thanks to Rod Dreher of The American Conservative for pointing this stupidity out.
Is Twitter a Dying Brand?
Nor is Disney the only company that said no to Twitter; both Alphabet (NASDAQ: GOOG) and Salesforce.com (NYSE: CRM) dropped plans to buy Twitter, Bloomberg reported. One has to wonder if this is because of Twitter’s association with an unpopular and controversial political figure namely Donald Trump, or that it is simply a bad company.
Twitter’s financial numbers are simply awful according to ycharts. A few highlights shows that Disney’s team made the right decision for shareholders as well as good taste and common sense. They include:
- A negative earnings per share number of -.6.
- A negative net income of -$408.87 million.
- A negative profit margin of -17.91%.
- A negative return on equity of -9.33%.
Twitter has a Lot of Float
Twitter seems to be losing money although it does have a lot of cash according to ycharts. Some its current float includes:
- $6.617 billion in assets
- $578.23 million in cash from operations.
- $3.588 billion in cash and short-term investments.
- A free cash flow of $175.47 million.
All this indicates that Twitter might be able to make some money with the right management. It would be a profitable acquisition for the right buyer because revenues are growing constantly.
Why Twitter has More Value than you think
Twitter reported revenues of $973.91 million in June 2014 that grew to $1.779 billion a year later and $2.476 billion in 2016. That indicates it is capable of generating revenue and float from advertising.
Some investor or company will snap Twitter up if just to get their hands on that revenue. The company’s steadily expanding user base is not as big as that at Facebook’s (NASDAQ: FB) WhatsApp; which has over one billion users, but it is impressive.
One big advantage to Twitter is that it has lots of affluent middle-aged upper class users in the United States and other developed companies. Another attraction to the service is all the attention the news media; particularly in the United States, pays to it. That will certainly be an attraction to companies that profit from advertising revenue, like Berkshire Hathaway (NYSE: BRK.B) particularly if Twitter can be cleaned up.
Despite that Twitter is a real lousy investment for average investors. It has no dividend yield according to ycharts and is not scheduled to pay one anytime soon according to NASDAQ. To that we can add the 9.33% return on equity those numbers tell me stay away from this stock folks it stinks.
Disney is a Well-Managed Value Investment
The Twitter decision shows us why DIS is a good value investment right now. Bob Iger was willing to resist the fast buck to protect the company’s long-term reputation.
Disney might have made some money from Twitter, but its reputation would have been dragged into the gutter. He put the reputation of the brand, which is Disney’s greatest asset ahead of cheap opportunity. That proves Disney worth the $91.16 it was trading for on October 19, 2016.
If you’re looking for a value investment; forget about Twitter and check out Disney. The Magic Kingdom is a very well-managed company that knows how to stay out of the Twitter gutter.
Note: for those interested in Disney’s financials I’m waiting for its third quarter earnings report to dig into them.