It has been a tumultuous summer for Twitter Inc. (NYSE:TWTR), with plenty of bad press and no shortage of rumors feeding the storyline that the social media titan is ripe for takeover or even shutdown. But to borrow Mark Twain’s classic smackdown, reports of Twitter’s death have been greatly exaggerated, and it seems that the nasty gossip is hardly hurting Twitter stock.
When Life Hands You Lemons…
Admittedly, a lot of the negative buzz surrounding the company has some basis of truth. The TWTR stock is still hovering below the approximately $26.00 per share level of its initial public offering (IPO) in November 2015 and its second-quarter earnings report last month was more than a little disappointing: a $107-million net loss on $602 million in sales, the slowest quarter of revenue growth since Twitter went public. (Source: “Twitter’s turnaround hopes are slipping away, along with its revenue growth,” Quartz, July 26, 2016.)
The desultory earnings report was then followed by a skein of unwelcome headlines, including the defection of Jim Prosser, Twitter’s high-profile vice president of global communications, to the online lending company SoFi and charges of censorship through suspending the Twitter accounts of Breitbart News Network tech editor Milo Yiannopoulos for trash-talking comedian Leslie Jones and self-proclaimed hacker Guccifer 2.0 for posting secret files that were unflattering to Hillary Clinton and the Democratic National Committee.
For some investors, the news that Twitter Inc. was seeking to sublease as much as 30% of its 600,000-square-foot San Francisco headquarters and more than 24,000 square feet of its New York City office space appeared to betray evidence that the company could not sustain a continued lack of profits. (Source: “Twitter to Rent Major HQ Space Amid Slump (TWTR),” Investopedia, August 9, 2016.)
The excess of bad news surrounding Twitter helped to feed rumors of potential buyouts, and a story took root claiming that the company would shut down in 2017. That created a frenzy that brought about 100,000 tweets carrying the #SaveTwitter message before the company insisted it had no plans to fold up. (Source: “Twitter denies #SaveTwitter rumors of shutting down in 2017,” Reuters, August 11, 2016)
TWTR Stock Retains Respect
Despite these stumbles and embarrassments, Twitter continues to remain a significant force in social media and the wider entertainment world. The company added three million new users in the second quarter and had 313 million monthly active users at the end of the first half of 2016. And of course, a day cannot pass without a presidential candidate or Hollywood icon taking to Twitter to post a salacious observation or high-decibel rant.
Twitter has also become a ubiquitous channel in the sports world, with live streaming deals involving the National Football League, the National Basketball Association, Major League Baseball and the National Hockey League, among other professional sports entities. This summer, CBS News teamed up with Twitter to live stream the Republican and Democratic National Conventions, and unconfirmed (as of this writing) news that Twitter and Apple Inc. are in negotiations to add the Twitter app to “Apple TV” would give the company a vibrant new platform for its users’ messaging needs. (Source: “With N.F.L. Deal, Twitter Live-Streams Its Ambitions,” The New York Times, August 14, 2016.)
Plus, a new partnership deal in which Pepsi would become the launch partner of Twitter’s “Promoted #Stickers” advertising product reaffirmed the company’s ability to stay relevant with major consumer product companies. (Source: “Twitter shares were up by roughly 7% during today’s trading session,” The Country Caller, August 15, 2016.)
The double-whammy of the Pepsi partnership and the unconfirmed Apple TV pairing brought new energy to the TWTR stock, which soared nearly seven percent in August 15’s trading. This was in stark contrast to the pessimism that followed the second-quarter earnings report, with several analysts and industry observers sneering at the viability of Twitter stock.
But despite its oscilloscope-worthy highs and lows, Twitter has been able to command and retain the respect from several prominent hedge funds and institutional investors. Earlier this month, Integrated Investment Consultants LLC increased its position in shares of Twitter Inc. by 85.9% in the second quarter, while Financial Architects Inc. increased its position in Twitter by 80.4%, and Southport Capital Management and Peapack-Gladstone Financial Corp bought new positions in Twitter during the second quarter valued at approximately $152,000 and $169,000, respectively. (Source: “Twitter’s (TWTR) ‘Buy’ Rating Reiterated at Jefferies Group,” The Cerbat Gem, August 9, 2016.)
The Takeaway Regarding TWTR Stock
If anything, investing in Twitter stock is not for the faint of heart. The company’s inability to keep a proactive handle on its publicity can have some jittery investors reaching for antacid bottles, and—while its ability to partner with A-list companies is impressive—Twitter cannot afford (literally and figuratively) to be the continued subject of careless talk regarding buyouts or shutdowns.
Still, the company’s prominence has yet to abate, and all evidence is pointing to a healthy future as a major force in live streaming and social media marketing. To borrow the lingo of the “tweet” world, Twitter stock is certainly a #GoodInvestment for those who are #NotEasilyFrightened.