Since its late-2013 IPO, I’ve been a regular critic of Twitter Inc (NYSE:TWTR), cautioning investors that TWTR stock was best left avoided. It’s not that Twitter couldn’t be a success. It’s just that the company wouldn’t do any of things it should have been doing to achieve that success.
Well, buckle up baby, ’cause you’re about to be blown away. For the first time ever, I’m actually optimistic enough to suggest TWTR stock is a buy, albeit a speculative one.
The company is, perhaps without even realizing it, doing the one thing it needs to do to make it competitive with Facebook, Inc. (NASDAQ:FB), and the one thing it needs to do to hold off Snap Inc (NYSE:SNAP).
Better yet, the TWTR stock price itself is dropping hints that the majority of traders now see a light at the end of the tunnel. That’s half the battle, so to speak.
Threads’ Appeal to Users’ Vanity
This week, Twitter officially launched what it calls “threads,” which allow users to post several related tweets in a row without another user’s response breaking up the flow.
They’re called tweetstorms, by the way, a term given rise by user’s need to post a series of rapid-fire tweets they didn’t want interrupted by another user’s responses. Tweetstorms are essentially a workaround the platform’s inherent limitations primarily, the 280-character limit per tweet.
Within the “threads” framework, several sequential tweets can be penned at the same time and posted simultaneously, in order.
If it seems like it would be easier to simply extend the cap on tweet lengths to… oh, several thousand so users could get a complete and thorough thought out as they do with Facebook, you’re not wrong. But, whatever. The point is, people can now get it all off their chest, so to speak, via Twitter, just like they can with Facebook’s interface.
It’s a big deal for one simple reason, the same reason I said as far back as January of last year was the reason Twitter couldn’t compete with Facebook when it comes to drawing and keeping a crowd. I said then (and reiterated several times since then), “Facebook appeals to an individual’s vanity, whereas Twitter does not.”
To be even more explicit, there’s nothing more thrilling than seeing your words become a web page, archived forever, infuriating some and infatuating others. Twitter just never let its users talk about themselves the way most people like to talk about themselves (and ensure they’re heard by at least somebody).
Threads is a big step in that direction. Expanding the per-tweet character limit from 140 to 280 back in early November was another step in that direction.
TWTR Stock Heating Up
To be clear, a larger character limit and longer-stringed entries in and of themselves don’t drive a 180-degree turnaround for the company. They’re not the only changes CEO Jack Dorsey has implemented, however. They’re just a microcosm of the million little adjustments the company has made after going through a long learning curve at a snail’s pace.
Regardless of the pace, Twitter is turning the corner. Though the top line was still shrinking as of the third quarter, the pace of that decline has slowed tremendously, so much so that it expects revenue growth and a swing to a profit for the quarter currently underway.
What’s more, investors believe it, investors who have good reason to not expect great things from this company.
The evidence of this idea is packed into the chart of TWTR stock, which as of the middle of this year has amazingly enough wiggled its way into an uptrend.
You don’t get that kind of persistent, methodical progress when the market doesn’t believe in a company’s future. The most compelling aspect of the move so far, ironically enough, is the slow pace at which it’s unfurling. The slower the pace, the more sustainable the advance is.
Bottom Line for TWTR Stock
Don’t read too much into the message. This TWTR stock rally is anything but bulletproof, and January’s earnings report may well end up being a disappointment. It’s unlikely Dorsey would set himself up to be a guy who overpromised and underdelivered, especially after a rocky start for Twitter and himself.
Rather, this budding bullish effort and the changes Twitter has made to its microblogging platform that make it more like Facebook are the real deal for the right reasons.
It could still take a long time for the company to bear meaningful fruit, but this is one of those story stocks where the trajectory is more important than the company’s present condition.
For the first time ever, I have to be a (cautiously) bullish on TWTR stock.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.