Compared to a wide range of high-flying technology stocks, Twitter Inc (NYSE:TWTR) just hasn’t cut the cake for investors. Perhaps it’s the lack of sustained elevated growth that has come with the above-average initial public offering sticker price. Perhaps it’s the fact that TWTR stock appears to be losing the race to become an integrated media company to its peers at an increasingly faster rate.
Or, perhaps, it is because TWTR is simply under-utilized and it is not unlocking enough of its potential value for shareholders.
Among the social media platforms most consumers use, TWTR remains an important source of curated news and information. With over 500 million tweets sent out each day, the social media company has done a good job of growing its user base and 140-character content offerings for anyone with access to the internet.
Where TWTR Stands Today
With approximately 330 million monthly active users on the platform and daily active users increasing in the double-digit range year-over-year, it appears Twitter management is doing a good job of creating a robust and growing number of eyeballs, a trend which is unlikely to halt any time soon (especially with the more recent “Trump bump” carrying the platform forward).
While its user base is impressive, TWTR stock investors have generally been displeased with the speed at which the social media platform has monetized its user base. Having a massive number of monthly active users means nothing if the operation continues to bleed red; the company’s sustained lack of profitability has only served to push potential investors away from Twitter stock and toward other social media giants such as Facebook Inc (NASDAQ:FB) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), which do nothing but churn out cash for shareholders.
Shareholders and analysts agree that the existence of such a material user base holds value in and of itself, as the potential for monetization and long-term growth remain the primary focus for investors taking a bullish position on the platform. How TWTR eventually goes about turning this potential into cash is the main concern top of mind for most investors today.
In my opinion, the user base of TWTR is currently significantly undervalued by the market for a few key reasons.
In an argument made by analyst Andrew Left of Citron Research on BlackBerry Ltd (NASDAQ:BBRY), it was noted that BBRY’s 60 million vehicle install base for its QNX software was reason enough to place a (perhaps excessive) price target of $20 on the embattled software company.
Mr. Left related this hefty price target to previous short positions turned sour in growth companies with robust consumer bases in which he failed to properly value the company’s underlying user/install base, effectively writing off the long-term profit potential stemming from this consumer base. Given the robust long-term prospects of TWTR as compared to BBRY, investors betting on a turnaround play seemingly have a few tech options to consider at current levels.