Is Twitter's Stock Overdue for a Correction?

Twitter (NYSE:TWTR) is trading around all-time highs and over the past year, shares of the social media stock have soared more than 120%.

Not only has it outperformed the S&P 500 which is up by 22% over that time frame, but it has also blown past Amazon (NASDAQ:AMZN) and its 56% returns.

However, at a forward price-to-earnings ratio of more than 80, it is looking a whole lot more expensive than Amazon, which trades at 65 times its future earnings.

Twitter also unveiled a controversial new feature recently, called "Super Follow" which will allow content creators to charge monthly subscription fees. While it can help drive more revenue for Twitter and encourage more companies to use its platform, it will be a big test to see how much demand there would be for such a service and it runs the risks of turning some users away.

This is still a business model that isn't very proven; in the trailing 12 months, Twitter has incurred losses totaling $1.1 billion and its operating income is just $27 million on revenue of more than $3.7 billion. When it is profitable, Twitter's margins are razor-thin. And sales in 2020 only grew at a rate of 7.4%.

There is a lot of risk investing in this stock right now. Not only is it an expensive buy but the company is rolling the dice on a new feature that may do more harm than good. And with the markets looking shaky of late, this may not be the best time to be making a bet on Twitter.