Is Twitter Stock Turning Around?
In recent years, Twitter Inc (NYSE:TWTR) has taken a beating from the market. Much of that displeasure came from the company’s weak revenue growth, but TWTR stock may benefit from a tipping point in its “Periscope” streaming service.
I’ve noticed a growing discrepancy in the price of Twitter stock. Investors have become so accustomed to thinking of TWTR stock as a loser that they’ve failed to notice the unbelievable deals that CEO Jack Dorsey has signed. He’s been on a roll lately. Investors were skeptical when he returned to save Twitter stock from the big, bad market, especially since he continued to run another company.
Dorsey was splitting his time between Square Inc (NYSE:SQ) and Twitter, which made investors uneasy about his ability to turn the company around. His return bought TWTR stock a few months of half-hearted support, but stock investors eventually lost interest.
To my credit, I always held out hope that Dorsey could pull off a miraculous return for Twitter stock. Now my faith is being rewarded. The company is signing deals left and right with networks, athletic associations, and advertisers. Those of us who get paid to watch this stuff finally understand what Dorsey is aiming for: Twitter as a TV channel.
There are moments when a business makes a move and you think, “Whoa, why didn’t I think of that? It’s so obviously the right move for them!” Twitter just had that moment.
What This Means for TWTR Stock Outlook
When Twitter launched Periscope less than two years ago, it was considered an important addition to the company. However, the live video streaming service failed to live up to expectations … until now.
Twitter stock is still trading 30% lower than it was last year, but I’ve never been more bullish on the company. It has signed deals to live stream games from the National Football League (NFL), the National Hockey League (NHL), and Major League Baseball (MLB).
That’s right; starting September 15, Thursday Night Football will be viewable on Twitter. (Source: “Twitter Is Adding Free MLB and NHL Live Streams to Its Sports Lineup,” Fortune, July 25, 2016.)
Considering that football is a de facto religion for U.S. sports fans, it seems obvious that advertisers are going to flock to Twitter. After all, some ad dollars have already started flowing in for the livestream of the U.S. Open, a major tennis tournament.
JP Morgan Chase & Co. (NYSE:JPM) and Grey Goose vodka are sponsoring a short series with tennis star Andy Roddick. He will provide commentary on the tournament while also answering questions that users submit to Twitter. (Source: “Twitter’s Periscope Launches Ad Program for Live-Streaming Broadcasts,” Variety, September 1, 2016.)
Granted, the U.S. Open is big deal in tennis, but it’s hardly comparable to the monetization available from Thursday Night Football. So if tennis can boost Twitter’s advertising revenues, just imagine what the NFL deal can do for TWTR stock.
The National Basketball Association (NBA) is also granting Twitter the rights to stream two talk shows. This type of video content has worked wonders for rival services like Facebook Inc (NASDAQ:FB), so any honest reading of the situation suggests that Twitter stock is ripe for a comeback. In other words, sports video streaming is the catalyst that TWTR stock needed.
Looking ahead, I expect that Twitter’s revenues will start growing but the bottom line will continue to lag. These deals are bound to come with a heavy price tag. That being said, the top line should be the defining metric for Twitter stock.
Bearish investors were complaining that Twitter’s growth had flatlined. So, if these new deals kick-start growth, they should logically be bullish on TWTR stock. Unfortunately, most people aren’t logical. The market is always two steps behind the truth, which is why Twitter stock is so cheap right now. It’s on the verge of extraordinary gains.
My hope is that Twitter finally breaks free of comparisons to Facebook, because they are heading down different paths. While both are pushing into livestreaming video, Facebook is also pushing out of its comfort zone. The company is making waves in the consumer electronics market that some analysts believe will be bigger than the “iPhone!”
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