The past six weeks have been nothing short of wild for Twitter (NYSE:TWTR) stock. It all started at the end of July, when Twitter stock fell off a cliff from $40 to $30 after TWTR reported disappointing quarterly numbers that included a sequential drop in its monthly active user base. Then, TWTR stock rebounded to $35 as investors focused on its improved monetization rates rather than its sluggish user growth. Now, though, Twitter stock is again, dropping, moving back towards $30 after its CEO, Jack Dorsey, testified before the Senate Intelligence Committee and implied that the company is still deleting a ton of “fake” accounts.

What’s the investment implication of all of the recent volatility of Twitter stock?

Above $40, TWTR stock was out over its skis. That was the time to sell. At $30, Twitter stock had plunged into undervalued territory, considering the platform’s improved monetization rates and profitability. That was the time to buy. At $35, Twitter stock climbed back into fair value territory. That was the time to sell.

Now, as Twitter stock once again closes in on $30, it is once again a good time to buy.

Fundamentals Say Buy TWTR Stock Near $30

The Twitter story has some bad aspects, but it has more good attributes than bad ones.

Twitter has a big problem with its user base. Ever since its total number of users crossed over 300 million a few years back, the platform’s user base has grown at a snail’s pace. Now, Twitter’s monthly active user base is actually dropping. A large part of the decline is probably due to the company’s decision to delete so many fake accounts. Dorsey implied at the Senate hearing that the pace of fake account removal isn’t slowing all that much, so the deletions are likely to remain a persistent headwind for user growth going forward.

However, Twitter also has some pretty big tailwinds when it comes to increasing users’ daily engagement, improving its monetization rates, and expanding its margins. Despite a sequential drop in monthly active users from 336 million to 335 million, Twitter’s daily active user base grew 11% year-over-year last quarter. That data point implies that while Twitter’s audience may be limited in scope, it is also very loyal, and that loyalty is only growing. Higher daily engagement rates are driving higher monetization rates, as the company’s average revenue per user jumped a great deal last quarter, and higher monetization rates are driving its margins higher.

Thus, Twitter’s narrative is defined by slow user growth, fast ARPU growth, and rapid margin expansion.

Looking at the big upcoming picture, Twitter will likely add a few million users per year over the next five years, and reach 350 million monthly users by 2022. During that stretch, Twitter’s ARPU should scale towards $13 or higher. The company’s gross margins should bounce back to historic highs and potentially even reach record-breaking levels as its high-margin data licensing business becomes a bigger driver. Meanwhile, the company’s healthy revenue growth should increase its leverage over its operating expenses.

Putting that all together, I reasonably see Twitter netting $2 in earnings per share in five years. Applying a Facebook (NASDAQ:FB

) and Google (NASDAQ:GOOG) multiple of 25 times forward EPS of $2 implies a December, 2021 price target for TWTR stock of $50. Discounted back by 10% per year, that equates to a December, 2018 price target for Twitter stock of just under $38.

Considering we are only halfway through fiscal 2018, the present value of Twitter stock hovers right around the $35 range. Thus, as Twitter stock closes in on $30, the shares’ risk-reward profile starts to look pretty compelling.

The Technicals Say Buy Twitter Stock At $30

From a technical perspective, the last line of defense for this stock is the 200-day moving average, which currently hovers around $32. Twitter stock has held that 200-day moving average before, most recently during the selloff that occurred in the wake of the company’s Q2 results. Consequently, the technicals indicate that we should buy this stock as it closes in on its 200-day moving average.

Moreover, during the most recent post-Q2 selloff, Twitter stock dropped to just over $30. It increasingly looks like we are going to test that bottom again. Considering the 200-day moving average provides support around there, and that fundamentals support a $35 fair value for Twitter stock, it also increasingly looks like we are going to bounce off that bottom, too.

Thus, the technicals imply that you want to buy Twitter stock as it closes in on $30.

Bottom Line on TWTR Stock

I’m not a huge bull on Twitter stock. But this stock is worth about $35 today. So, if bad optics continue to drag the shares back towards $30, I think you should buy the stock.

As of this writing, Luke Lango was long GOOG and FB, and may initiate a long position in TWTR within the next 72 hours.