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Brian Wieser, an analyst at Pivotal Research Group, says investors shouldn’t be put off by Facebook comparisons. He says Twitter is a "niche" business, but one with potentially a bright future selling ads. He reckons the company is worth maybe $29 per share.
But even bulls like Wieser say Twitter is a gamble. Twitter is less developed than most companies going public, he says, and is therefore an investment perhaps better suited for a venture capitalist than a public investor.
"They have to invent the ad products. They have to evangelize to marketers," he says. "They have to get advertisers to cut checks."
As with any company in the early stages of building its business, investors should expect plenty of hiccups, and in surprising places.
Take Twitter’s supposed strength — all those users accessing it via smartphones. Skeptics say that because of the small screen, Twitter could easily alienate users as it tries to squeeze in more tweets from advertisers.
One thing Twitter pessimists can’t deny about the IPO: The timing seems perfect. The tech-heavy Nasdaq index is up 30 percent in 2013, and the stocks of plenty of unprofitable companies have soared.
Zynga, a maker of games played over the Internet, is losing money this year and is expected to do the same in 2014. Its stock is up 56 percent this year. Yelp, the user-generated review site, is a big money loser, too. Its stock has more than tripled.
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