The long-term risk-versus-reward potential of Twitter Inc (NYSE:TWTR) remains a strong topic of debate, especially as Facebook Inc (NASDAQ:FB), and more recently Snap Inc. (NYSE:SNAP), apply pressure on Twitter to secure the portion unclaimed ad dollars. That said, i expect TWTR to reach $22 by the end of the year, delivering 26% returns.
It’s true, Twitter — the second-largest social media platform in the world — hasn’t put up the growth metrics Wall Street needs to see before assigning TWTR stock with a higher multiple. Still, the embattled social media company is on the verge of a recovery, as evidenced by the company adding 9 million monthly active users (MAU) during the first quarter.
Of that total, the fact that 3 million MAUs were added in the U.S. alone suggests that TWTR stock — after several quarters of disappointing user growth — has more oomph left in it.
This, however, has been more than just one-quarter phenomenon. Twitter’s user growth rate has shown modest acceleration that spans the past five quarters. Thanks are due to CEO Jack Dorsey, who emphasized more user engagement on the platform. Unlike last year, the first quarter was the first clear indication that the company’s efforts to draw users, including its push into live-streaming video, is beginning to pay dividends. And Dorsey is ready to double down on his live-stream investments.
Last week the company hired former Bloomberg executive Todd Swidler to head its live video business — yet another sign that Twitter is aiming to grow that business and court more high-paying advertisers. Recode noted that Swidler will be responsible for growing Twitter’s 24/7 live streaming content agreement with Bloomberg, which will deliver breaking-news network that will be global, live and exclusive. Think of Twitter as a micro CNN. The network will reportedly launch in the fall.
Swidler will also be in charge of the day-to-day operations of the unit, which includes Twitter’s partnerships. These include deals with the NFL, NBA, MLB, among other sports leagues. It’s more than just lip service this time, though Twitter has boasted this 24/7 live streaming network for more than a year.
Anthony Notto, Twitter’s COO recently told BuzzFeed that real-time news and shows not only increases Twitter’s conversation volume, it allows Twitter to offer advertisers the type of features they will pay up for on TV networks.
“We will definitely have 24/7 content on Twitter,” Noto promised, adding, “Our goal is to be a dependable place so that when you want to see what’s happening, you think of going to Twitter.”
All told, a new narrative in Twitter is emerging. While Wall Street has responded in kind to the growth of Twitter’s users — shares are up 17% in three months — TWTR stock still remains discounted relative to both Facebook and Snap.
Based on Friday’s closing price of $18.25, TWTR stock was trading almost 30% below its 52-week high of $25.25. From my point of view, all of the bad news about Twitter is known and anyone who have wanted to exit these shares have likely done so by now. I expect TWTR to reach $22 by the end of the year, delivering 20% returns.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
