Huge Catalysts for TWTR Stock
Twitter Inc (NYSE:TWTR) has been trading at its lowest amount since it went public in November 2013. TWTR stock started to fall sharply after the last quarter, even as Twitter itself generated 36% higher revenue. Somehow that increase was not good enough, but Twitter should be announcing some changes to help sustain revenue growth—enough to please analysts in the next quarterly results announcement.
The advantage for investors is that Twitter has been stripped of its Silicon Valley technology aura. The company is back to normal valuations. How do you keep justifying that kind of price for what is a single-purpose social media company? Now at $14.00 per share, Twitter stock is more than just an interesting proposition. At that price, a small change in the company’s strategy or a new advertising contract can quickly add value. A loss, meanwhile, will still let you sleep at night.
Twitter has established its role in the world, and it has already become a cultural phenomenon. Twitter has no replacement other than another Twitter. Therefore, Twitter’s valuation depends on what management can do to help turn the cultural phenomenon into an economic one. Every little step counts.
Twitter has gone through an existential war against itself over the past year. Jack Dorsey’s return to the helm of the company he founded was one of the battles and reaffirming the 140-character tweet limit was another.
But Dorsey has not won the war yet. That’s why Twitter stock is such a speculative buy proposition. Dorsey will keep changing, adapting, modifying, and tweaking the company’s product, slowly adding value—or the perception of value—attracting more advertising and the revenue with which it comes.
One of these changes is coming. Twitter, a micro-blogging site, will offer more flexibility to its users without altering its trademark 140-character limit. Bloomberg says that links and photos will no longer be included in the 140 characters that constitute the limit for messages. That is fully in keeping with the company’s model. It does not change the character of Twitter; it simply makes it more flexible. And flexibility means more people will be inclined to use it, stimulating advertisers as well. (Source: “Twitter to Stop Counting Photos and Links in 140-Character Limit,” Bloomberg, May 16, 2016.)
In January, Dorsey made no secret of his personal willingness to adapt to the new desires of its users. Indeed, as any service expert knows, it’s important to address customers’ needs—but it’s also important to keep your reason for being. Reaching the right compromise between what we can call tradition and change is a formula for success and longevity. That’s what has kept such companies as Patek Philippe, Rolex, Ferrari, or Rolls Royce around decades after they were founded.
The brand is key. Twitter now has 320 million users. It has suffered some competition from “Instagram,” the photo-sharing application owned by Facebook, which had over 400 million users as of last year. That would explain why Dorsey has considered allowing the photos and links to be excluded from the 140-character limit. Now, tweeters will be more inclined to share their pictures and thoughts via Twitter.
The 140-character limit for tweets was originally chosen to fit the size of mobile phone screens in 2006, which was the year Twitter entered the vernacular. Phone screens were smaller then, smartphones did not exist yet, and Apple had just launched the “iPod” for music. Now, the short tweets are one of the company’s strengths. It forces users to think fast and respond instinctively to events or comment on TV programs, live sports matches, or the news.
Too many characters, as other platforms offer, allow users too much time to think and consider their posts. Twitter keeps things raw; that is its trademark. But Twitter is not a fossil either.
Twitter’s web site now offers video. In early April, Twitter announced that the National Football League (NFL) chose it as the platform to live stream football games on Thursday evening in 2016. The NFL season has not started yet; it begins next September. When it does start, though, look for advertising to increase on Twitter.
That’s when Twitter stock should see a surge.