Twitter and Fitbit are two of the few stocks that are down in the portfolio, and let’s address each of them today.
Twitter’s user growth has stalled and the company’s doing everything they can to get it growing again. Periscope is going to be huge and is growing steadily but it’s not generating any revenues for the company yet and is several quarters away from doing so. We’ve all seen Facebook’s ability to roll up other dominant technology platforms and then layer new revenues on those platforms like Instagram and we expect we’ll see similar results with Whatsapp and Messenger. And the market rewards those expectations with a high multiple for the stock. With the turnover at the CEO and other executive levels at Twitter and the user base seemingly maxing out around 300 million, we are less sure about Twitter’s ability to monetize even a winner like Periscope. Frankly, nobody knows exactly how quickly Periscope is growing as the Twitter last disclosed the Periscope user base at 10 million back in August. Can Jack Dorsey turn the company around? Definitely. But it’s far from a sure thing and I’m going to step back from this name for a month or two, taking a loss on it and revisiting it in the new year with a fresh perspective.
Fitbit is also a tough one here though I’m going to hold onto it here and even nibble a little bit more common stock in the name for my own personal portfolio, adding a small 1/8th-size tranche or so. There are lots of major corporations that are starting to pay and/or subsidize Fitbits for their employees, which collectively can add up to hundreds of thousands or even millions of Fitbit unit sales into enterprises in the next few quarters in addition to the general consumer growth in fitness wearables. Fitbit is close to becoming a platform in its own right and it certainly has hit critical mass as a fitness tracking platform. Looking back at their first generation fitness tracker just five years ago vs what their newest wearables look like today, you can see the company is aggressively innovating.
The company recently did a secondary that was less than smooth and because of that, Fitbit will remain a relatively small position for me overall even with today’s nibble. I do think the stock could be back towards $50 per share if the company has a strong Christmas, though it certainly has more downside if holiday unit sales miss expectations.