Trying to gauge the direction of political winds isn’t necessarily the ideal investment strategy. When it comes to Twitter (NYSE:TWTR), it’s much more prudent to look at the data and make a calm, well-considered decision about Twitter stock.
That’s easier said than done, I’ll admit. With the U.S. still so divided and Donald Trump being banned from Twitter and other social media platforms, it’s challenging to separate out political inclinations from our trading strategies.
And it’s fully understood that the headlines, including the Trump ban from Twitter, could affect the Twitter stock price. Therefore, investors shouldn’t ignore political developments entirely.
The most important thing is to remain balanced in our approach and try to look more objectively at the issue. One of those sides is the technical angle, so let’s begin with a glance at the price action of Twitter stock.
A Closer Look at Twitter Stock
The best way to describe Twitter stock is as a dip-buyer’s paradise. Even a momentum-driven stock like Twitter doesn’t go up in a straight line. Along the way to new heights, the pullbacks have served as prime buying opportunities.
Just in the past year, there have been no fewer than four buyable dips in Twitter stock. I’m not even including March’s Covid-19-induced crash in that calculation.
Remember, even if you already own the stock, the pullbacks offer a chance to add to your position if you have the capital available. For example, early November and mid-January offered up terrific bargains for Twitter investors.
Therefore, even as I cite reasons to buy, it doesn’t mean that you have to buy today. There will always be drawdowns, so it’s perfectly fine to wait patiently for the next dip-buying opportunity.
Acknowledging the Uncertain
Twitter has recently admitted that it was difficult to predict how its advertisers may have reacted to the Nov. 3 U.S. presidential election.
Ahead of that election, Twitter updated its policies. This included a ban on political ads. The idea, evidently, was to enhance the trustworthiness of the platform.
Moreover, Twitter seeks to proactively identify and remove abusive content from the platform. Only time will tell whether this backfires or ends up working in Twitter’s favor.
Twitter stockholders must accept the possibility that political backlash could hurt the company and the share price.
For instance, Florida Gov. Ron DeSantis recently announced that he was backing state legislation that would fine social media outlets $100,000 per day for removing a political candidate from their platforms during a Florida election campaign.
It’s tough to predict the future, but at least we can analyze Twitter’s past and present performance and offer some educated guesses. So, let’s see what the data says.
Still Going Strong, So Far
Third-quarter results indicate that Twitter is still going strong. The platform’s average monetizable daily active users grew by 29% on a year-over-year basis during that quarter.
Furthermore, Twitter’s third-quarter revenues increased by 14% year-over-year. This week, the company plans to report its fourth-quarter earnings results.
The consensus estimate for Twitter’s fourth-quarter earnings indicates a 20% year-over-year improvement. Meanwhile, analysts are bracing for 17.7% year-over-year growth in the company’s revenues.
Whether or not it meets those expectations Twitter is still an important player in a highly lucrative market.
Research firm eMarketer reports that total worldwide digital ad spending is on track to hit $395.5 billion by 2021’s end. Also, eMarketer expects Twitter’s total worldwide ad revenue to reach $3.4 billion by the end of 2021.
That would represent a 24% year-over-year increase, eMarketer calculates. So, Twitter has the potential to remain highly profitable regardless of political issues.
The Bottom Line
It’s fine to be aware of political headlines, but there’s no need to let them deter you from owning Twitter stock.
Instead, you might consider buying the shares on any pullback in the stock price. Twitter stock has been a dip-buyer’s dream and should remain so in the foreseeable future.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.