Twitter (NYSE:TWTR) is finally achieving some of its potential and that’s got Twitter stock up 39% year to date through Dec. 17, well ahead of many of the big-name tech stocks like Apple (NASDAQ:AAPL) and even Amazon (NASDAQ:AMZN). Back in mid-August, I wrote about Mark Cuban selling his TWTR stock, because he felt the volatility creeping into the markets made cash a safer bet for his money.
With all that’s gone on since then — the S&P 500 is down more than 10% since my August 14 article — it’s hard to argue with the billionaire’s logic.
As they say, “Live to fight another day.”
Despite Cuban’s caution, I felt like buying Twitter stock at prices less than $30 made a lot of sense.
“Below $30, Twitter is a bargain. If you already own it, I wouldn’t sell; instead, I would wait for an entry point below $30 to buy some more,” I wrote.
Trading around $33 at the time, down significantly from its July highs near $48, it proceeded to fall below $30 in mid-September, to around $27 a month later, eventually recovering to $33 and change where it trades today.
Heading into 2019, unless there’s a significant market correction or a flash recession, I see sub-$30 as a good entry point for interested investors.
User Engagement Matters
In my August article, I expressed the opinion that as long as Twitter continues to generate consistent profits — not necessarily tremendous growth, but consistent — and keeps working on user engagement, i.e., reduces the number of trolls, fake news stories, and privacy issues, the stock’s going to keep moving higher.
Recently, my InvestorPlace colleague Vince Martin echoed this sentiment.
“The company simply needs to keep doing what it’s doing, as shown by a monster Q3 earnings report. Revenue rose 30%, yet daily active users rose just 9% and monthly active users declined over 1%….,” Martin wrote Dec. 14. “… Twitter simply is getting better at monetizing its users and better serving its advertisers.”
And that’s the beauty of the trajectory that Twitter’s been on the past year. It’s not spectacular, but it’s steady, and that’s all advertisers care about.
If it continues to underpromise and overdeliver, Twitter hitting $40 and staying there through the end of next year seems like a certainty.
Twitter and Square
However, Twitter’s proven that it too can be a useful tool when put in the hands of a small business in need of a little exposure. I’m not talking about the type of rant President Trump throws out there, but useful information for existing and potential customers.
If Twitter could harness AI to help me focus my knowledge gathering, I’m not sure I’d need email newsletters, Google, and the countless other tools I use to keep up with the world.
The fact is, Twitter remains a much better way to gather information, at least for me, than Facebook or LinkedIn ever could.
The Bottom Line on Twitter Stock
Heading into 2019, Twitter remains one of those stocks investors can make money on over the long haul, by merely buying Twitter stock when others, like Mark Cuban, are fearful.
I wasn’t always so positive about Twitter or its stock.
Here’s what I said about it in May 2017:
“Unless it can figure out how to squeeze more profits out of its revenues, Twitter’s got no chance of making money on a GAAP basis in 2017, or perhaps even in 2018, making its current 4.7 price-sales ratio a little pricey.”
Well, today, it’s P/S ratio is almost double that.
Thankfully, I finished by suggesting it wouldn’t be a bad idea to take a small position despite a few quarters of sales declines. It’s more than doubled since then.
I have no such reluctance recommending Twitter stock today. That’s especially true below $30. And while you’re at, you might want to pick up some SQ stock too.
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.