Has Twitter Inc Finally Found Its Calling? (TWTR)

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Twitter stock - Has Twitter Inc Finally Found Its Calling? (TWTR)

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Tonight’s presidential debate will be must-see TV for tens of millions of people, and Twitter Inc (NYSE:TWTR) will get a huge slice of the action. Twitter has expanded its partnership with Bloomberg Television to live-stream the event, including pre- and post-event coverage with moderators Mark Halperin and John Heilemann. If Twitter stock has a turnaround plan that isn’t dependent on being bought out, this is it.

Has Twitter Inc Found Its Calling ... As a Streaming Company? TWTR stock

Jack Dorsey is trying to save TWTR by turning his company into a streaming video platform. And I don’t have many qualms with this strategy. According to Dorsey, the vision of Twitter is about “what’s happening now … whether it’s breaking news, entertainment, sports, or other everyday topics … that’s the power of Twitter.”

Twitter has bolstered its video technology via deals like its buyout of Magic Pony, a company has built systems for machine learning and visual processing to deliver better experiences on mobile devices). TWTR also has made a flurry of content deals like with Major League Baseball, the National Basketball Association, the National Hockey League and the National Football League.

It’s a rapid advance in a short amount of time. But it still might not be enough to get Twitter stock back on track.

Just look at the NFL deal, in which Twitter streams Thursday Night Football games. Only roughly 243,000 viewers per minute watched the Twitter feed in its debut two weeks ago. And why should we be surprised? Football is one of the biggest selling points of big-screen TVs, and vice versa. A cramped smartphone screen is not the ideal medium.

In Twitter’s defense, it’s finding ways to crawl around this, such as by making the content available on Apple Inc.’s (NASDAQ:AAPL) Apple TV and Microsoft Corporation’s (NASDAQ:MSFT) Xbox One.

However, there is another important issue to note: Broadcasting major events — which, by nature, are episodic — will generally not lead to daily usage. This is where operators like Facebook Inc (NASDAQ:FB), Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Snapchat have a huge advantage. Their services are about frequent sharing of messages, photos and videos. That’s how you build a daily active user base of 1.13 billion. That’s how you bring in 15% of the world’s population.

Twitter is charging hard but is charging late to the video streaming game, and is now trying to catch up to competitors that have gobbled up market share. Heck, as of April, Snapchat was logging 10 billion video views a day.

That’s up from 8 billion in February.

Bottom Line on Twitter Stock

It should be no surprise that Facebook, Google and Snapchat are attracting substantial ad revenues. In the meantime, TWTR is experiencing a deceleration on its top line. During the latest quarter, revenues climbed only 20% and are expected to increase only 5% in the current quarter.

Twitter stock holders should be terrified at this prospect. Revenue issues mean TWTR won’t have the resources to compete against its mega-rivals. Geez, during the most recent board meeting, Twitter actually discussed cutting costs.

You think that’s a big topic of discussion at Facebook? Alphabet? Hardly.

Of course, many TWTR shareholders are likely waiting to be saved by the buyout angel. CNBC reported last week that a few companies — Alphabet and Salesforce.com, inc. (NYSE:CRM) are believed to be among them — are interested in making a play for Twitter.

But don’t get too optimistic. Oppenheimer analyst Jason Helfstein says Twitter stock may not fetch much of a premium because the likely suitors are not tech operators, but traditional media companies. What’s more, he notes there is little evidence that the video streaming initiative is getting much traction. Helfstein has a $17 price target on Twitter stock — a 23% discount to the current valuation.

When a consumer Internet company loses its momentum, it is tough to make a comeback. Just look at Yahoo! Inc. (NASDAQ:YHOO) and AOL, which both made their final pop on M&A.

So if you’re looking at Twitter stock right now, you’d better be confident in a buyout, because otherwise, TWTR still has issues to face.

Tom Taulli runs the InvestorPlace blog IPO Playbook and also OptionTaxes.com, which provides interactive tools for those who have employee stock options (pre and post IPO). Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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Tom Taulli is the author of various books. They include Artificial Intelligence Basics and the Robotic Process Automation Handbook. His upcoming book is called Generative AI: How ChatGPT and other AI Tools Will Revolutionize Business.


Article printed from InvestorPlace Media, https://investorplace.com/2016/09/twitter-inc-streaming-twtr-debate/.

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