If you plotted a chart of Twitter’s (NASDAQ:TWTR) rise in popularity, relevance and universal acceptance versus a chart of TWTR stock, it would form almost a perfect “X”. Few high-profile companies have had less desirable stocks.
Could that finally be changing? If you go by the last seven months, yes. Twitter stock is up 50% since April and is just coming off of 52-week highs above $22.
However, the longer-term picture for TWTR stock doesn’t look quite so rosy. It’s still down nearly 50% since going public and hasn’t traded higher than $23 in two years. Despite being near its highest point all year, that $23 mark looks like a resistance line for TWTR stock.
However, there are reasons to believe that the TWTR stock price is on the cusp of breaking through that long-term resistance. Let me count them…
Four Potential TWTR Catalysts
1) Improving sales and earnings. Twitter has never been profitable and sales have declined every quarter this year. All that’s about to change, according to analysts. Consensus estimates expect Twitter to earn $0.40 per share in 2018 on 6.1% sales growth. The bottom-line projections are particularly encouraging, considering the company has never been close to profitability.
2) More than just Tweeting. Last fall, Twitter partnered with the NFL to stream a few Thursday Night Football games. Its data licensing agreements are becoming an increasingly larger part of the business, growing 22% in the latest quarter (versus an 8% decline in advertising revenue, which still accounts for roughly 85% of total sales). Now the company is partnering with Bloomberg to create a streaming news network. It all proves that Twitter is no longer a one-trick pony, dependent solely on ad revenues. As the company continues to innovate and diversify, sales should improve — and so should TWTR stock.
3) Presidential approval. Twitter was mainstream long before Donald Trump was elected. But the 45th president’s affinity for using the social media platform as a megaphone to shout down detractors and promote agenda items has made Twitter universal to all ages. As Trump’s profile has ascended, so has Twitter’s. Is it mere coincidence that TWTR stock is up more than 17% in the year since Trump was elected, after losing more than half its value in its first three years as a public company? Perhaps. But acceptance of Twitter as part of our everyday lives could be spreading to Wall Street, thanks in large part to the most talked-about person on the planet.
4) Paid subscribers coming? Like Facebook (NASDAQ:FB), Twitter is free to all users. That could soon change: the company is considering offering a paid subscription service to news organizations and large brands. The service could include breaking news alerts, information about what an account’s followers are tweeting, and more in-depth analytics. The company is in the early stages of developing a subscription-based model, conducting a survey to gauge interest in the offering. If Twitter does decide to go forward with the scheme, it could be yet another non-advertising revenue stream.
Bottom Line on TWTR Stock
Some of these potential catalysts for a TWTR stock breakout are further down the road than others. Add them together, however, and there’s enough there to extend the current rally for quite some time — and I didn’t even mention the technical momentum in the chart.
Barring a long-feared market correction in the coming months, my guess is TWTR stock will break above $23 by year’s end. Once it does that, this little blue bird may finally start to fly.
As of this writing Chris Fraley did not hold a position in any of the aforementioned securities.