EQUITY

TRADING

REPORT

Ryerson Paper Trading Club

Twitter (TWTR) – Sell

By Noah Hazlett, Neil Jonatan, Rottem Maor, Liam Hennessy

November 1, 2020

Trading Report #7

Executive Letter

Dear reader,

The purpose of our reports is to demonstrate our executives’ deep knowledge and understanding of investments, the financial industry,

financial indicators, risk management, etc.

All reports are approved, fact-checked and edited by Founding President Neil Jonatan and Co-V.P.s of Financial Analysts Rottem Maor

and Liam Hennessy.

Disclaimer: The analyses and conclusions of Ryerson Paper Trading Club (“RPTC") contained in this presentation are based on publicly

available information. RPTC recognizes that there may be confidential information in the possession of the companies discussed in the

presentation that could lead these companies to disagree with RPTC’s conclusions. This presentation and the information contained

herein is not a recommendation or solicitation to buy or sell any securities.

The analyses provided may include certain statements, estimates and projections prepared with respect to, among other things, the

historical and anticipated operating performance of the companies, access to capital markets and the values of assets and liabilities. Such

statements, estimates, and projections reflect various assumptions by RPTC concerning anticipated results that are inherently subject to

significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative purposes. No

representations, express or implied, are made as to the accuracy or completeness of such statements, estimates or projections or with

respect to any other materials herein. Actual results may vary materially from the estimates and projected results contained herein.

The sole responsibility for the content of this publication lies with the authors. Its contents do not reflect the opinion of RPTC. RPTC

assumes no responsibility or liability for any error, inaccuracy, omission or comment contained in this publication or for any use that may

be made of such information by the reader.

Sincerely,

Neil Jonatan

Founding President

Rottem Maor

Co-V.P. of Financial Analysts

Liam Hennessy

Co-V.P. of Financial Analysts

Investment Overview

Key Financials Business Summary

Ticker NYSE: TWTR

Twitter is a Social Media company founded by its current CEO Jack Dorsey and Noah Glass in San Francisco, California. The platform allows users to share opinions by “tweeting,” which is a short text that is shown in an online feed. Users can also submit videos and photos to their feed and links to other websites that they wish to share. Twitter generates the majority of revenue from advertising.

Share Price $51.27 (USD) 52 Week Range $20- $51.51 (USD) Market Capitalization $40.55B (USD) Forward P / E 68.97 Total Debt / Equity 53.97 Forward Dividend Yield N/A

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Fundamental Analysis

S.W.O.T Analysis In this case, the SWOT analysis is essential to develop an understanding of Twitter’s business and valuation.

Strengths Twitter has a strong user base of 166 million daily active users. Businesses rely on Twitter to spread information about products, specifically 67% of businesses rely on twitter for business-to-business marketing. Twitter had Strong earnings pre-Covid. In 2019, Twitter reported revenues of $3 billion dollars and earnings of $1.5 Billion dollars which is close to a 50% profit margin

Weakness: Twitter holds a web visit market share of 6.88% in comparisons to Facebook’s 74.58%. Censorship is an issue, as Twitter has been accused of being biased towards certain news pages by labelling them as “misinformation” instantaneously without thorough revision. Twitter has a strong reliance on the U.S. market, as it accounts for 56% of its revenues. Lack of diversification is a weakness as Twitter relies on one stream of revenue strictly from its social media platform. In addition, there is a large concern over user data safety. Twitter has had multiple mishaps where the information of users has been leaked or stolen.

Opportunities: Online Stores: Twitter has an opportunity to follow the lead of Facebook by incorporating a feature to allow businesses to sell and advertise their products on the platform. Twitter can also enter the music or video streaming service industry to compete with their competitors such as Facebook and Tik-Tok. Twitter can also provide a clear set of guidelines for misinformation and hate speech; they can assemble an unbiased non-partisan team that will specialize and evaluate large user attracting posts so the platform can accommodate all users. Threats: The Senate has subpoenaed the company’s CEO over claims of moderating content under biased guidelines, this has prompted the Senate to look at reappealing section 230 of the Communications and decency act which allows Twitter to be protected from being liable for the posts of their users, there has been speculation that this could end social media as we know it. Twitter has consistently been dominated by Facebook and its platforms along with a new entrant into the industry Tik-Tok which continues to syphon ad revenue away from the company.

Technical Analysis

NYSE: TWTR

The two main technical indicators we decided to use were the SMA (Simple Moving Average) and the RSI (Relative Strength Index). Based upon the SMA you can see that TWTR is trading substantially higher than its average indicating that it could be overbought. The chart shows that Twitter is currently deviating from its average by around 22%. Based upon the RSI, throughout the past week Twitter has been jumping in and out of oversold territory which is a bearish signal indicating a possible selloff for the stock in the future. Twitter currently sits at 68 on the RSI index and is 12 points out of oversold territory.

Investment Valuation

Comparative Valuation

On the valuation table, TWTR’s EV/Sales, EV/EBITDA and P/E are above average, meaning that the company is overvalued. TWTR’s sales and earnings are significantly below its competitors as has underperformed them in both by a substantial margin in comparison to the average. Twitter’s P/E as mentioned before is significantly higher than the average, almost double, show the company is completely overvalued.

Market Data Financial Data Valuation

Price Market Cap Enterprise Value Sales Earnings Profit Margin EV/Sales EV/EBITDA P/E

Company Name (Per/Share) ($M) ($M) ($M) ($M) (%) x x x

Twitter $ 51.27 $ 38,000 $ 36,140 $ 3,320 $ (1,230) -37.06% 10.88 69.78 68.97

Facebook $ 267.67 $ 762,544 $ 763,610 $ 75,160 $ 25,320 31.30% 10.16 21.86 26.04

Shutterstock Inc. $ 65.80 $ 2,830 $ 2,090 $ 652 $ 50.24 7.70% 3.21 26.66 28.99

Google $ 1,516.62 $ 1,030,000 $ 1,010,000 $ 166,000 $ 31,530 18.99% 6.07 20.89 29.76

Match Group Inc. $ 117.24 $ 30,480 $ 35,180 $ 4.480 $ 84.37 1.72% 7.19 40.62 46.16

Average $ 49,027 $ 11,151 4.53% 7.50 35.96 39.98

Median $ 3,320 $ 84.37 7.70% 7.19 26.66 29.76

*As of October 29, 2020

Recommendation Thesis Summary

As a student run investment club, PTC’s purpose is to recommend investments in companies that are positioned to grow in value and sell those that have a negative outlook.

Our thorough analysis has led us to the conclusion that Twitter Inc. is going to decrease in price in the short term.

Conditional SELL at $51.27

Implied Return on Investment (Short Sell): 10.00% - 15.00%

Risk Management Strategy Target Visualization

Optimal Execution Price: $51.27

Buy Loss: $54.26

Targets:

• 1st – $46.14 (10% gain)

• 2nd – $43.58 (15% gain) Risk/Reward Ratio: 5.83%: 10.00% - 15.00% Portfolio Allocation: 4 – 5%

Citations (1) Yahoo Finance. 2020, Twitter Inc. Retrieved from https://finance.yahoo.com/quote/TWTR?p=TWTR

(2) USA Today, 2020, Facebook, Twitter, Google Accused-Bias Against Trump Conservatives Senate Hearing, Retrieved from

https://www.usatoday.com/story/tech/2020/10/28/facebook-twitter-google-accused-bias-against-trump-conservatives-

senate-hearing/3753440001/

(3) Vox, Facebook Twitter Google Zuckerberg Dorsey Pichai Senate Section-230 hearing, Retrieved from

https://www.vox.com/recode/2020/10/28/21536780/facebook-twitter-google-zuckerberg-dorsey-pichai-senate-section-230-

hearing

(4) Washington Post, Twitter Facebook Google Senate Hearing Live Updates, Retrieved from

https://www.washingtonpost.com/technology/2020/10/28/twitter-facebook-google-senate-hearing-live-updates/

(5) Statcounter. 2020, Social Media Stats, Retrieved from https://gs.statcounter.com/social-media-stats

(6) Trading View, 2020, Twitter, Retrieved from https://www.tradingview.com/symbols/NYSE-TWTR/