Twitter (NYSE:TWTR) finds itself plagued by struggles to grow its user base as the company figures out how to monetize its site. These struggles have taken down the stock price of the San Francisco-based social media company in recent months. Twitter stock has fallen by close to 45% since its last earnings report.

Despite stagnant user growth, the profit picture has seen a substantial improvement. Given the benefits and uncertainties surrounding TWTR, investors should take another look at the stock as it approaches its October earnings date.

Twitter’s Profit Outlook Improves

The Twitter stock price has seen a slow, steady decline since it fell sharply following its July earnings report. Though it beat on earnings and revenue, the microblogging giant saw its stock tumble as the number of monthly active users (MAUs) fell.

The company blamed this loss on an increase in account suspensions. Twitter is striving to be more diligent about suspending users who violate its terms of service.

I see this need to increase MAUs as the challenge facing Twitter. In fairness, the company has performed better. The previous earnings report also announced an 11% increase in daily active users, a sign that Twitter is keeping its current users more engaged.

Also, management has finally figured out how to monetize this site properly. As such, it now earns a profit. For this reason alone, the company stands in an infinitely better place than Snap (NYSE:SNAP).

Analysts project average annual growth of 32.25% per year over the next five years. Its forward price-to-earnings (PE) ratio stands at just above 30. Hence, one cannot describe Twitter stock as excessively overvalued.

Twitter Stock and MAUs

The issue of MAUs is the most significant growth barrier. U.S. MAUs grew from about 65 million in the first quarter of 2015 to around 68 million today. Over the same period, overall MAUs climbed from 302 million to about 335 million.

Profits continue improving despite this meager growth. Perhaps they can persist for a few years by squeezing more revenue from its current customer base. However, once they exhaust that option, where do they go?

Arch-rival Facebook (NASDAQ:FB) addressed this by buying other sites such as Instagram and WhatsApp. However, since Twitter turned profitable only recently, it lacks the cash resources of Facebook.

As mentioned previously, analysts still expect an average of 32.25% profit growth for the foreseeable future. Perhaps they can leverage this into either the creation or the purchase of the company’s next compelling site.

Or, at just over 30 times forward earnings, perhaps they can attract a buyer such as

Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) or Microsoft (NASDAQ:MSFT). Microsoft already owns LinkedIn, so such a move should not come as a surprise.

The Case for Twitter stock

The lack of ability to grow MAUs makes the long-term future of Twitter stock murky. The company has become adept at deriving more revenue and profit from its current user base. However, overall MAU growth has become incremental. This bodes poorly, especially if the company runs out of ways to further monetize the current user base.

That said, I see the case for taking a small position in this company. Both the forward PE ratio and the long-term annual growth rates both stand in the low 30s. This financial situation could attract a buyer.

Moreover, Facebook cannot adapt its site to compete directly with Twitter as it did with Snapchat. To do so would destroy Facebook’s current appeal.

Also, after the Google+ debacle finally met its end, I doubt Facebook or Alphabet would try to launch their own microblogging site.

Moreover, Twitter’s profit growth could place the company in a position to create or acquire additional sites as Facebook has done. I do not think it will ever match the size of Facebook, but it could become large enough to stand on its own.

The future of TWTR stock remains unknown. However, some of the most successful trades involve taking some degree of chance. Given the valuation, profit growth forecasts, and potential options, investors might want to consider a small stake in Twitter stock.

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.