Indeed, stagnant user growth should be high on the list of things the company must fix for Twitter stock to rise again, but it must also develop a sound strategy to monetize its platform. Management has outlined plans to revamp the company’s revenue products, including nixing various failed revenue drivers.
Likewise, in an attempt to better compete with Facebook, TWTR want video to be the focus of its product offering, which the company hopes will not only drive higher user engagement, but also revenue.
As one of the largest social media platforms in the world, Twitter — despite saying all of the right things — hasn’t put up the growth metrics Wall Street needs to see before assigning TWTR stock with a higher multiple. This is true, even when you compare the stock to Snap Inc (NYSE:SNAP).
As to whether Twitter stock should be bought on this pullback? It all depends on the extent to which you believe the company can grow its user base and monetize the platform. CEO Jack Dorsey, who many analysts believe has worn out his welcome, has promised to fixed these issues. To date, he has yet to deliver. And, at this point, it may take a management change or some level of investor activism to extract the value that can be unlocked from this company.
Bottom Line for TWTR
The long-term risk-versus-reward potential of Twitter remains a strong topic of debate, but TWTR stock seems more attractive at these levels than they were a month ago. That said, there’s also limited upside from here given that the company’s user base has stalled.
Plus, there are too many things that need to go right for Twitter stock, which is nothing more than an M&A play at this point, to regain Wall Street’s trust.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.