This Could Be Big for Twitter Stock
Twitter Inc (NYSE:TWTR) has seen better periods, nobody doubts that, and admittedly the company is struggling to build traffic, gain new users, and amass more revenue. Twitter stock has reflected this evident slump over the past few months with what might euphemistically be described as lackluster performance.
So, let’s set the record straight.
Twitter stock, like the company, is experiencing a tough period. Indeed, CEO Jack Dorsey is moonlighting just a few hundred yards down the road from Twitter, running a little mobile payment platform called Square. But Dorsey also knows that Twitter is the company with the most potential and ability to evolve.
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In other words, Twitter is the company with the most built-in growth. If you need any proof, just count how many times a news outlet, friend, colleague, or even you, for that matter, have used or heard the word “tweet” today. Tweeting and tweets have moved from the realm of ornithology and bird watching to mainstream culture. Even your trusty Uncle Joe could be a tweeter; it’s not just for activists and journalists.
So what does this mean for Twitter as a business and TWTR stock?
It means Twitter can’t fail. From a financial aspect, it might evolve through acquisition, but it won’t go into oblivion. People will be tweeting for many years to come, so it will be of some financial consequence to own the entity that spawned a global cultural phenomenon. Nobody could have predicted just how deeply Twitter would impact modern culture. Likewise, nobody can imagine a world without Twitter now.
Having established that, Twitter shares are still priced at a comfortable entry point. Dorsey can continue to entertain more ways to monetize the service. He can also start pondering merging Twitter. As it happens, in the past few days, rumors of such a thing have been tweeted. Perhaps as the window of opportunity for financial greatness in the style of a Facebook may have passed, there are more windows that Twitter can open through a merger with another Silicon Valley fallen giant like Yahoo! Inc. (NASDAQ:YHOO).
Alas, Twitter will not massively succeed. Not in the least because of its penchant for stock dilution. Not surprisingly, some say Twitter is happy merely surviving rather than thriving.
But because of its lack of financial tricks and its down-to-earth valuation, Twitter stock is also among the safest stocks in Silicon Valley now. What could be discounted has already been discounted, and those who get into TWTR stock now can sleep comfortably at night knowing they got in at the valley rather than at the precarious peaks. At that valley, the birds are tweeting in the hills a new song of hope that has the sound of “Yahoo.”
How do you solve a problem like Twitter? Enter Yahoo.
According to the New York Post, Twitter executives met with Yahoo CEO Marissa Mayer. The big question now is this: are they discussing a merger? That’s what the paper is suggesting. (Source: “Twitter Reportedly Held Merger Talks With Yahoo,” Fortune, June 3, 2016.)
Apparently, the merger negotiations started weeks ago. Yahoo has been adamant about seeking all possible ways to improve its future, such as selling Internet activities. Now it seems Twitter merging with Yahoo might be the route to higher revenue.
After months of struggling to grow its userbase, the social network has struggled to monetize its audience. Twitter needs to act fast—this means prospective investors should also act fast with TWTR stock—because if the situation were not already complicated enough, a new competitor is emerging.
As Bloomberg reports, Snapchat has just crossed the 150 million daily users barrier, which is 10 million more than the 140 million daily users Twitter claims. (Source: “Snapchat Passes Twitter in Daily Usage,” Bloomberg, June 3, 2016.)
Founded in 2011, Snapchat is relying on a younger audience, perhaps with a shorter attention span, compared to Twitter’s audience. This makes Snapchat less of a competitor than it is an alternative, but Twitter, which started in 2006, has come out of its honeymoon period. The network is facing normal growth difficulties and needs to find solutions to monetize its audience and gain more advertising.
A merger between Twitter and Yahoo could give rise to an entirely new player and new possibilities, which we cannot yet imagine.
In short, it’s no time to be bailing on Twitter stock now.