Here we go again. A day after Facebook (NASDAQ:FB) stock dropped 7% on regulation and data privacy concerns, Twitter (NYSE:TWTR) stock dropped nearly 15% on the back of a Citron short report that labeled Twitter as the “Harvey Weinstein of Social Media” and slapped a $20 price target on TWTR stock.

Ouch. Citron came to that conclusion following an Amnesty International report that concluded Twitter has a “toxic” culture. Its crowdsourced report analyzed hundreds of thousands of tweets across nearly 800 female journalists and politicians in the U.S. and U.K. to determine that the platform is a “place where racism, misogyny and homophobia are allowed to flourish basically unchecked”.

That’s no good. In the era of #metoo movement that sees advertisers stepping away from sociopolitical controversy and regulators are looking to step in, Amnesty International’s report could have ugly implications for Twitter’s business and TWTR stock.

Enter short-seller Citron, which posits that the Amnesty report, coupled with current trends, will force Twitter to self-monitor its platform. This will ultimately send traffic, engagement, and user numbers lower. Twitter shares can’t afford this big step backwards, since it’s already trading at a premium valuation. Consequently, Citron concludes the only direction for TWTR stock is down.

To be clear, what’s happening on Twitter isn’t okay. The well-founded Amnesty International report does find that hate in many forms — misogyny, racism, and political — runs rampant throughout the platform. That’s not good. It needs to be fixed.

But for investors, let’s put the brakes on this bearishness. In the big picture, Amnesty International has been publishing reports about Twitter’s “toxic” culture for more than a year now, and there’s been no negative impact on TWTR shares.

Meanwhile, the company has the ability to self-regulate the platform without hurting growth. And, the valuation on Twitter shares is big only because margins are low and expanding strongly, meaning that if you model the current expansion trajectory out, TWTR stock isn’t all that expensive at $30.

All in all, this negative headline risk will blow over. Twitter’s growth will remain healthy. TWTR stock will bounce back. And, in the meantime, this is a dip worth buying.

Sociopolitical Headline Risks Are Overstated

Earlier finger-pointing about Twitter being a toxic platform (see here and here) hasn’t caused advertisers to step away from the platform at all. In fact, despite Amnesty International’s analysis, traffic, engagement, and ad revenue growth have actually steadily improved over the past year.

Why? Because regardless of the headline noise that such sociopolitical reports cause, the world still loves Twitter. For many, it’s an irreplaceable digital communication tool, and its utility as such has not been nor will it ever be washed out by even several million bad tweets (Twitter processes somewhere around 200 billion tweets per year).

Meanwhile, let’s also not pretend that Twitter is ignoring the problem, having deleted millions of fake and harmful accounts over the past year. They’ve also taken steps to remove hate speech and other derogatory content. They’ve updated community rules and guidelines. In short, they’ve done a lot over the past year.

Are they done? No. But, progress towards perfection is exactly what’s happening. It is exactly what will continue to happen over the next several years. This could eat into user growth. But, it’s all edge-case stuff. Over the next several years, Twitter will continue to improve its self-regulation while sustaining its core user and advertiser audience.

Overall, the current sociopolitical headlines that have caused Twitter stock to shed nearly 15% are overstated. The problem is fixable, Twitter is addressing it and the business won’t take a hit during the fixing process.

TWTR Valuation Makes Sense

A big knock against Twitter stock in the Citron report was valuation. Specifically, Citron called out Twitter stock for trading at huge premium to peers like Facebook and Google parent Alphabet (NASDAQ:GOOGL).

This is true. Facebook shares trades at 18x forward earnings while Alphabet’s multiple is 22x. Twitter stock trades at an ostensibly absurd 35x forward earnings. And, that doesn’t make much sense if you consider that Twitter’s revenue growth rate last quarter (29%) is right in between Google’s (22%) and Facebook’s (33%).

But, that cursory analysis misses why TWTR stock trades at a premium.

It all comes down to margins. Google’s margins are already maxed out and dropping. Same with Facebook’s margins. But, Twitter’s margins are low and roaring higher. Moreover, judging by where Facebook’s margins are, Twitter’s still have a long ways to go before they max out.

Indeed, because of this margin expansion potential, even moderate 10% revenue growth projections over the next several years lead to a reasonable EPS target by 2023 of $1.75. Throw a much more normal 25x forward multiple on that, and you arrive at a fiscal 2022 price target of nearly $44. Discounted back by 10% per year, that equates to a 2018 price target of ~$30, making any dip below $30 look tasty.

Bottom Line on TWTR Stock

Sure, Twitter stock has been volatile lately. But, it always tends to bounce on dips below the $30 level. Nothing about the Citron or Amnesty International reports changes the fundamental complexion surrounding TWTR stock. As such, nothing should materially change about the stock’s recent trading pattern.

From this perspective, it looks like Twitter stock could be due for a bounce back to $30 soon.

As of this writing, Luke Lango was long FB, TWTR, and GOOGL.