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Repairing Your Portfolio From Twitter

NEW YORK (TheStreet) -- Twitter (TWTR - Get Report) reported earnings Wednesday after the close, and for a normal company the report wasn't as repugnant as the subsequent free fall in share price may suggest.

Twitter isn't your typical stock even by the sometimes schizophrenic technology sector standards. I've covered why I believe this investment is full of peril in several articles including a week ago with Two Tech Stocks: One Hero and One Zero. Zynga (ZNGA) appreciated over 25% while Twitter lost about 25% of its market value.

While it's true that after you ignore a bunch of expenses the company posted a fourth-quarter fiscal 2013 profit of 2 cents, considerably better than the expected slight loss, and revenue increased an eye-popping 116% from the same period last year. Without removing those pesky "one-time" charges that seem to happen in one shape or another every quarter, Twitter lost $1.41 per share.

Losing $1.41 isn't the reason for the selloff, though. The problem shareholders face is the stock is priced like a Buzz Lightyear action figure -- to perfection and beyond -- while many key metrics are impressive, including a 600% gain in advertising and 80% increase in data licensing revenue. As you can tell, the company is growing quickly.

Many may ask, "What's the problem?" The problem is monthly active users didn't increase nearly as much as expected and, more important, a significantly larger gain was priced into the stock.

As we know with Amazon (AMZN), Tesla (TSLA) and SodaStream (SODA), bottom-line earnings isn't the most critical metric for a company with rapid growth. Tesla continues to race down the track, but Amazon and SodaStream recently gapped lower after growth expectations diminished. Twitter now joins the others, and Tesla more than likely will, also, before the year is over.

Ok, so Twitter isn't growing, or at least didn't expand as rapidly as hopeful investors bet on -- but now the shares can be bought for 25% less. Does this mean now is the time to buy? I don't believe so.

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