Twitter Inc: Here’s Why Twitter Stock Could Surge in 2017

Twitter StockTwitter Inc’s New Drive for Profitability Could Boost TWTR Stock in 2017

In just two weeks, Twitter Inc (NYSE:TWTR) has experienced the kind of roller coaster ride that both thrills and scares the bejesus out of you.

Twitter stock reached a 2016 high of $24.87 on October 5 amid optimism that a “Prince Charming” was on its way to #acquire the company. Yet it was not to be. All the suitors turned out to be tire kickers. The most serious shopper came, saw, and lost.

After Walt Disney Co (NYSE:DIS) and Alphabet Inc (NASDAQ:GOOG) lost interest, salesforce.com inc.’s (NYSE:CRM) CEO Marc Benioff was forced to give in to his shareholders’ objections to the deal. Otherwise, he would have bought Twitter. (Source: “Marc Benioff Just Got Real About His Plans to Buy LinkedIn and Twitter,” Fortune, October 27, 2016.)

Twitter stock would now be trading at $24.00 or higher, had rumors of Benioff’s plans not leaked.

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But Benioff’s determination and his obvious regret at missing out on Twitter bodes well for the future of TWTR stock. It suggests that Twitter stock can attract buyers. Potential buyers not only like the product—Benioff is an avid user—but they can see its potential to add value.

Salesforce.com has acted like a shopaholic in 2016, and just weeks ago, Salesforce.com bought Krux Digital Inc. for over $700.0 million. Had TWTR stock been cheaper, perhaps Benioff would have gotten his prize.

Then Again, TWTR Stock Shareholders Would Not Have Liked a Lower Price

Twitter stock shareholders know they have a hot commodity on their hands. Many of the NASDAQ’s Who’s Who would benefit from owning Twitter. One example is Facebook Inc (NASDAQ:FB), which is great at monetizing social media, but not as good at spreading breaking news. That’s Twitter’s special ability.

Indeed, TWTR stock has fallen back to pre-deal interest prices, ranging from $17.00-$18.00 per share. If not exactly a bullish signal, it’s not a bearish one either. My impression is that, sooner or later, a buyer will come for the most famous microblogging site. Until then, to sustain the TWTR stock price, CEO Jack Dorsey will have to concentrate on plan B: lay off staff and try to make money.

The first part, the layoffs, has already begun. Over the next few days, it seems that Twitter will dismiss 350 workers. That’s a big number, almost 10% of the company’s workforce. It’s not the first time that layoffs at Twitter have happened either. Last year, when Dorsey returned to Twitter as CEO, a similar number of workers had to find new opportunities (through LinkedIn Corp (NYSE:LNKD) perhaps?).

The announcement of the Twitter layoffs came just ahead of the company’s quarterly results on October 27. The good news is that Twitter posted an earnings beat. For TWTR stock shareholders, the important takeaway is that Dorsey’s plans to revive the company are working. Twitter has gone on a full-out campaign to increase its number of users. This includes signing deals with the National Football League (NFL) for live games.

Not surprisingly, advertisers have taken notice, and Twitter can now boast having accumulated $616.0 million in revenue and adjusted earnings of $0.13 per share. The newly announced layoffs are part of an overall restructuring plan, reaching for profitability in 2017. (Source: “Twitter climbs on earnings beat, job cuts announcement,” CNBC, October 27, 2016.)

Twitter Has Not Betrayed Bullish Expectations: It Has Delayed Them

October should have been a month of hopeful change for the future of the microblogging platform. Instead, it has stayed in limbo. But it’s something of a bullish limbo, because the company has shown that the changes have worked. It’s true that difficulties remain and that Twitter has lost 40% of its value in the last 12 months.

The better earnings might prompt the conditions for some of the tire kickers who expressed interest in Twitter last September to return. This time, they will have a better case to make to their own shareholders. Twitter appears to have gone more mainstream in its philosophy; less “Kumbaya” and more sound business. Twitter CFO Anthony Noto stated that the company’s goal now is profitability in 2017.

Penalized by competition from the apps “Instagram” (owned by Facebook) and “Snapchat” (owned by Snap Inc.), Twitter’s management team seems confident about having a plan to confront that challenge.

Watch for the next quarter. If Twitter’s restructuring continues to bring results, potential buyers will come rushing in before the TWTR stock price rises too high on fact, rather than on mere speculation.