So maybe Twitter (TWTR) isn’t a train wreck after all. The micro-blogging site knocked it out of the park last quarter, in terms of revenue, and TWTR stock was sent soaring in Wednesday’s after-hours trading as a result.
Specifically, Twitter posted sales of $312 million Q2, topping estimates of $283 million, and TWTR stock vaulted about 25% on the heels of the news. Particularly impressive was the website’s user growth, ramping up 24% on a year-over-year basis, reaching 271 million. Twitter also posted a small operating profit for its second quarter.
The company’s surprising growth (on all fronts) raises an inevitable question … is Twitter finally a real threat to venerable Facebook (FB)? More relevant to investors, is TWTR stock now a better holding than FB stock? As always, it’s a subjective matter. On the other hand, there are some relatively objective ideas traders can weigh if there’s only room for one stock in their portfolios
The Future of Twitter
While the pros and cons of Twitter have been hashed out ad nauseam ever since the stock’s IPO in November of last year, the debate can be boiled down to this simple assessment: Some investors don’t believe the blogging platform is engaging enough to attract and retain users, while other investors believe the platform can be tweaked to the point where Twitter could be as big of a draw as — and possibly even bigger than — Facebook.
And for its first couple of quarters as a publicly-traded company, the doubters looked largely vindicated. In the fourth quarter of 2013, as an example, Twitter’s user growth slumped to only 30%, and then fell to only 25% growth in the first quarter of 2014. TWTR stock gave up 60% of its value between the end of Q4 and May of this year too, largely in response to the waning growth numbers. Yet, one could also argue the company did little during that time to convince investors it knew how to right its wrongs.
A funny thing happened on the road to disaster, however. CEO Dick Costolo terminated a couple top-level employees, and recognized that Twitter needs to rework the look and functionality of the platform. Perhaps most of all, though, Costolo understood that in addition to developing a clear vision for Twitter’s future, he needs to convey it to users, employees and investors.
He finally got through to investors on Tuesday during the earnings call…