NEW YORK (The Street) -- Twitter's ( TWTR) public debut has certainly been different than that of main rival Facebook ( FB). After breaking out of the starting gates and hitting a high price per share of over $50, the stock has cooled down, closing on Veterans Day at $42.90. Volume was merely 16 million shares, having traded over 117.7 million shares on IPO day, Nov. 7.
What should concern shareholders and potential buyers is that only around 25% of Twitter's ad revenues derive from international advertisers. In the maze of regulatory filings, the company basically said it was poised and ready to grow the use of its advertising platform overseas. Twitter is reportedly setting up offices in ports of call like Paris, London and Singapore to make haste on its promise to seize this advertising potential.
The company's corporate profile promises magical qualities and potential to grow by leaps and bounds. "Twitter is a global platform for public self-expression and conversation in real time. It provides various products for users, including Twitter that allows users to express themselves and create, distribute, and discover content."
TWTR also offers Vine, a smartphone app that creates and shares short, looping videos, and #Music, a mobile application that helps users discover new music and artists based on Tweets. The company also provides a set of development tools, public application programming interfaces, and embeddable widgets that developers can use to contribute their content to its platform; distribute Twitter content across their properties; and enhance their sites and applications with Twitter content.
In addition, Twitter offers products comprising promoted Tweets, promoted accounts, and promoted trends for advertisers, while offering subscription access to its data feed for data partners. Twitter has strategic partnerships with Comcast Corporation ( CMCSA) and NBCUniversal.
There are numerous ways Twitter can increase the percentage of ad revenue that comes from non-domestic sources. After all, Facebook eventually grew its international advertisers (outside of North America) to nearly 50%. Facebook has been around longer, and I'm still baffled as to how Twitter expected to compete with Facebook considering the big differences in its online space and look.
Twitter is all about tweets, something users spend much time looking at and very little time thinking about. Facebook has "walls" and multiple pages for each of its billions of users. Even if Facebook only had a billion users, those people spend a whole lot more time-per-view than those who tweet on Twitter.
I agree with what Jim Cramer wrote today that, "Twitter is incredibly expensive, both in its pricing at $26 [a share] and in its opening at $45. As I said all last week, everyone had a right to overpay for anything, as long as they are willing to accept the consequences, which may include the possibility that something will go wrong with the company or with the thesis."
As long as Twitter's officers remember that over 75% of its users live outside of North America, and signs many valuable ad deals in those regions of the world, a year from now we all may be wishing we had purchased shares the next time they approach the IPO price.
If you decide to buy some shares at these levels, by all means set up a trailing stop alert to protect you on the downside and let the shares run up, if indeed they do. If you want to learn what a trailing stop is now would be a great time to familiarize yourself with this risk management strategy.
Disclosure: At the time of the publication of this article the author was neither long nor short any companies mentioned.
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