2015 was a tumultuous year for Twitter (TWTR) and Twitter stock investors. Shares of TWTR are down 37% year-to-date as of this writing, user growth has slowed to a crawl in the last few quarters and new management is finally in place after a drawn-out CEO search that ended with the same guy it started with.
Despite continued revenue growth during 2015, investors punished Twitter stock.
Looking ahead, what can investors expect from TWTR stock in 2016? Will management, under new leadership from co-founder Jack Dorsey, continue telling the same story, or will it reinvigorate its flagship product while building out its satellite investments?
What Analysts Expect From Twitter Stock
2016 is expected to be another stellar year for TWTR’s revenue growth. Analysts currently estimate Twitter will add another $900 million to its top line, growing 41%.
This revenue growth will have to come from improving its monetization of its existing users, as TWTR’s management has demonstrated an inability to reignite user growth. CFO Anthony Noto likes to point out that the company is still only at one-third of its long-term capacity for ad load, but ad load is already very high in Twitter’s most established and valuable markets.
Perhaps, however, Twitter will find revenue growth as it aims to monetize its logged-out audience. When Twitter announced that it’s starting to test ads based on context for its logged-out visitors, investors sent Twitter stock climbing 6%. Nonetheless, shares of TWTR stock now trade near their all-time low just a few weeks later. The reaction seemed overblown at the time, since COO Adam Bain told analysts that was in the plans for the fourth quarter during the company’s Q3 earnings call.
Twitter may also find revenue growth from its audience network and MoPub. Earlier this year Twitter unveiled new tools to enable Twitter advertisers to reach a wider audience by leveraging its developer platform, Fabric and MoPub. Twitter can now show its ads on over one billion devices that use apps developed with Fabric or that use MoPub to fill ad inventory.
What Twitter Stock Investors Should Pay Attention To in 2016
There are a few developments for Twitter stock investors to pay attention to as 2016 kicks off.
Moments: Management has been talking about Moments — a new feature that curates content around specific events or topics — like it is the solution to all of TWTR’s problems. The company launched its first branded ad campaign including television commercials around the new feature. If it doesn’t produce meaningful user growth and improve engagement rates, it will be something of a disappointment for TWTR stock investors. Look for more insights starting with the company’s fourth-quarter report in January.
Vine and Periscope: These two satellite products don’t currently have any monetization mechanisms in place, but look for continued user growth from both products. Vine says more than 200 million people watch at least one Vine every month, and Periscope gathered 10 million registered users within four months of launching. Both products are in the burgeoning mobile video space, meaning excellent potential for monetization down the road.
The Total Audience Strategy: TWTR management has been touting the total audience strategy for over a year now. It wants Twitter stock investors to think of Twitter not just as 320 million monthly active users, but the billion-plus people that see tweets across the Internet every month. If Twitter’s efforts to monetize this audience prove ineffective, it could cause some revisions of management’s outlook for 2016. Management has stated that it believes it can monetize logged-out visitors at half the rate of its core active users.
2016: A Make-Or-Break Year for TWTR Stock
After falling to all-time lows in 2015, next year will be a make-or-break year for Twitter stock investors. Management’s efforts are finally coming together, and we’ll now see if the investments TWTR is making will pay off in the form of new user growth and monetization potential.
While analysts are currently expecting strong revenue growth in 2016, a price-to-sales ratio well below its peers indicates they don’t believe that revenue growth will continue.
TWTR stock investors are hoping management can prove Wall Street wrong in 2016.
As of this writing Adam Levy held no positions in the above mentioned companies.
