Twitter Inc (TWTR) stock has fallen more than 70% from its all-time highs, and in 2016 alone, TWTR stock is down 22%.
While most technology and high-beta stocks have fallen with the market, Twitter stock losses are certainly extreme.
What makes this ironic is that Twitter’s prospects as a company have never looked better.
Big Changes Taking Place at TWTR
Jack Dorsey is now the permanent CEO at Twitter. Already, Dorsey has made bold changes to the cost structure and business model that were necessary, but previously undone by past management.
These includes removing 8% of its workforce to become more efficient and force accountability among current employees. And more importantly, it includes the monetization of Twitter’s 500 million logged-off users.
Fact is that Twitter will never have one million-plus monthly active users. It is a niche service not for everyone, unlike Facebook Inc (FB). However, Twitter is still massive, with 320 million monthly users — and more importantly than its number of users is the number of consumers who actually see tweets on a daily and monthly basis.
According to the company, there are an extra 500 million people who do not actively use Twitter or have an account but who see tweets on a monthly basis. These people see tweets in Google search results, websites, apps, etc., and instead of dwelling on the fact that the company cannot convert those consumers into users, Dorsey made the bold move to start showing Promoted Tweets and other advertisements to those logged-off users.
Dorsey claims that Twitter will be able to monetize these logged-off users at about half the rate of its logged-on users.
Twitter Stock at Its Best Ever Investment Opportunity
In other words, Twitter has effectively cut its costs and created a massive, previously untapped revenue stream in the last couple months. These moves substantially improve the outlook for Twitter’s business and TWTR stock. Yet, Twitter stock has fallen from a cliff, now trading at just 3.7 times this year’s expected sales.
To put that in perspective, Twitter stock once traded at more than 20 times sales, a reflection of a company that grew nearly 60% last year and is expected to grow 40% in 2016.
Now that Twitter is showing ads to an extra 500 million users, investors should expect a rapid acceleration of revenue growth.
In retrospect, TWTR stock investors and analysts completely ignored and overlooked this fact, and ultimately that means Twitter will exceed low expectations and TWTR stock will more than likely outperform. So, not only is Twitter stock cheaper than it has ever been before, but is presenting a terrific investment opportunity.
In fact, due to how far the stock has fallen, and how cheap it has become, Twitter stock might be presenting its best-ever investment opportunity.
As of this writing, Brian Nichols owned shares of TWTR stock.