It’s something that arguably wouldn’t have been, and couldn’t have been, written about Twitter (NYSE:TWTR) just a few years ago. But Twitter stock could be a good way to avoid the current, overwhelming problem of market volatility.
That’s a tough pill for some investors to digest. Against a backdrop of a brutal trade war and in an environment in which Apple (NASDAQ:AAPL) and Qualcomm (NASDAQ:QCOM) have somehow settled their legal spat even as Facebook (NASDAQ:FB) is actually asking for privacy regulation, clearly nothing is etched in stone.
With all of its glorious, gimmick-free simplicity though, Twitter is the market’s proverbial breath of fresh air that not too many traders are noticing.
Off the Radar
Twitter is not Facebook, a nuance that’s been pointed out countless times since Twitter’s launch in 2006. It’s simplistic, lacking many of the vanity-minded features Facebook offers.
TWTR is also less potent as an advertising platform. Twitter’s average revenue per user is a little more than a third of Facebook’s, and it has only a fraction of Facebook’s regular user base. Twitter can’t benefit from being big because it’s not that large.
As it turns out, however, perhaps Twitter’s slightly less sophisticated i.e. less invasive, approach of getting to know its users has been a blessing in disguise.
That’s not to suggest the company has remained completely free of controversy. Twitter CEO Jack Dorsey was rather well-grilled by a Senate committee late last year, and Twitter was investigated for potential violations of the European Union’s GDPR (General Data Protection Regulation) rules shortly thereafter.
But Senators’ questions were focused more on censorship and less on privacy practices, and there’s little doubt that the EU has been far more concerned with Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) breadwinner Google and Facebook than it has been with Twitter.
Google and Facebook make for much juicier targets, while Twitter is relatively benign, so Twitter stock doesn’t face much of a regulatory headwind compared with other digital-ad stocks.
Twitter Stock Price to Be Boosted by More Steady Growth Ahead
Twitter has sought to serve as an interactive, television-delivery platform, with an emphasis on sports programming. It partners with the NFL, but also works with ESPN . Last year, the platform also made it radically easier for users to find and engage in discussions that are of most interest to them.
None of these platform improvements are exactly new though. They are tweaks that have been going on for years, so slowly that few observers have noticed.
Long-term owners of Twitter stock have surely noticed, however, that the new M.O. not only works, but that Twitter has avoided the regulatory and media pressure that bigger players like Google and Facebook are enduring. As a result, TWTR has had a solid streak of revenue growth that’s translating into similar earnings growth. Analysts expect more of the same for the foreseeable future.
The double-digit growth is sustainable simply because the company’s business model isn’t under attack the way Facebook’s is. Indirect rival Google is also setting itself up for a step backwards, recently unveiling a way for users to delete a big chunk of their life that the tech giant regularly monitors. Ads shown to those users should, as a result, theoretically be less targeted, and therefore less effective.
Twitter isn’t being forced to take such disruptive actions.
The Bottom Line on Twitter Stock
Though Twitter’s top and bottom lines are more secure in this privacy-minded era than those of its competitors, it would be naive to think Twitter stock is equally well-shielded from volatility. Most stocks tend to ebb and flow with the tide of the stock market.
For the right company though, bearish tides hurt a little less, and bullish tides help a little more.
And, if the market’s turbulence lasts long enough, raw financial results will eventually remind investors that TWTR stock is something of a standout, simply by virtue of sidestepping all the landmines too many other organizations have stepped on of late.
Hopefully proving its mettle in this way won’t be necessary, but given this week’s market-wide trouble, that may be something the company is called on to do. Twitter stock price should pass that stability/predictability test with flying colors.
As of this writing, James Brumley held a long position in Alphabet. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.
