Twitter Inc (TWTR), breaking last week’s rally on Monday with shares tumbling on news that the company will halt expansion plans, still is up a good 5% over the past five sessions thanks to both social media innovation and newly secured leadership.
Investors should not ignore that positive momentum in TWTR stock, even amid today’s declines.
After Twitter gained its footing last week, this social media company — with its potential to tap into a sizable, loyal user base with seemingly unlimited online ad options — can offer portfolios substantial growth.
TWTR stock was down about 5% early in Monday’s session on news that the company will halt its expansion of its San Francisco headquarters as well as lay off 4,100 employees — to many investors, signs of a struggling company. Still, these painful cost-cutting measures are essential in helping bolster a bottom line that has never climbed out of the red on a non-GAAP basis.
Last week, Twitter had much more positive drive, with TWTR stock up 13.3% trading near $31 per share Friday after the company anchored in a permanent CEO. Dorsey, also co-founder of Twitter, had been serving as interim CEO.
The abrupt rally caused some calls to caution — namely that Jack Dorsey’s appointment as full-time CEO didn’t erase any of Twitter’s other challenges. Plus, many are concerned that Dorsey will lack the focus necessary to turn TWTR around because he’ll be sharing his attention with Square, a payments company that’s expected to go public sometime in the near future, and that also features Dorsey as CEO.
Even Twitter co-founder Evan Williams said he believes Dorsey’s dual CEO roles are not ideal.
A Better Twitter Will Lift TWTR Stock
With its short, rapid-fire messages, the San Francisco-based company has become one of the fastest go-to sources for news and information, a standout communication tool that is about much more than being “social.” Twitter is showing it refuses to remain simply a micro-blogging platform trying to shore-up a wider membership base. Instead, Twitter continues to tinker with engagement channels and ad options.
Late Thursday, Twitter launched a YouTube-like video ad service, updating the Twitter Amplify video platform to let advertisers run video ads against premium content without an existing publisher-advertiser deal. Publishers already onboard with the initiative include Twenty-First Century Fox (FOXA), AOL (AOL), Sports Illustrated and the Weather Channel, all of which will get a cut of the ad revenue with automated payments.
Also last week, a day after Dorsey was named CEO, Twitter proved more innovation muster as it officially unveiled a new feature called Moments that shows users curated stories about top events, which allows them to follow topics the way they follow users. Users can tap a lightning bolt icon to see a list of stories on the topic they like throughout the day.
Moments, already garnering positive reviews, is similar to the hashtag filtration by topic, but in a different — and arguably more intuitive and useful — format.
As Twitter continually updates and innovates with the way users can engage on its blogging platform, its opportunities to craft innovative ad sources will increase, beyond even the video ad effort it just launched.
And while TWTR stock is indeed become more expensive last week, shares still are down some 45% from their 52-week highs, and have not fully recovered from a massive selloff in late April after Twitter cut its fiscal 2015 revenue forecast.
Monday’s declines just put the stock in better grasp.
Citing a weak demand for its new direct response advertising, TWTR stock tanked in April after it dropped its projected revenue range for the year to $2.17 billion to $2.27 billion, down from $2.3 billion to $2.35 billion. But its second-quarter earnings in July of 7 cents per share on $502 million in revenue beat expectations for 4 cents per share on $481 million in revenue.
Twitter at the time warned about stagnating growth in its userbase and advertising demand, but TWTR is showing as of late it is working to revive user engagement and to better monetize its platform.
At least one major investor identified Twitter’s trading trends and outlook as a buying opportunity. Saudi Arabian Prince Alwaleed Bin Talal disclosed this week that he and his investment firm hold a 5.17% stake in Twitter stock, or roughly 35 million shares.
The recent rebound in TWTR stock, combined with the current off-peak prices, present an ideal entry point for Twitter investors who can tap into a company that is quickly working to revive interest among users and advertisers.
As of this writing, Rebecca McClay did not hold a position in any of the aforementioned securities.
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