Twitter (NASDAQ:TWTR) wants to turn down the temperature. And analysts and politicians are cheering. Since the start of 2021, shares of TWTR stock are up 34%. The move began after the company banned the account of former President Donald Trump on Jan. 8, with shares at $52. They opened for trade Feb. 24 at $73.10. That’s a market capitalization of $57.8 billion, 15 times the company’s $3.72 billion of revenue in 2020.
The gains aren’t down to financial results. The company lost $1.14 billion in 2020, on revenue of $3.72 billion. After adjusting for losses related to Covid-19, the loss was just 4 cents per share. It’s expecting revenue of around $1 billion for the current quarter.
Less Politics, Thanks
Twitter has made a conscious decision to turn down the political heat, and not just on Trump.
The company launched a service called Birdwatch, which aims to crowdfund the search for misinformation on the platform. It’s testing a “review your tweet” feature aimed at ending “rage-tweeting,” when people get mad at a post and attack the person posting it. (I can use that.)
They’ve also been suspending accounts and putting more people in “Twitmo,” as victims of the practice call it. I am just getting out of Twitmo after using the wrong word to reference a political trend. I don’t object as a matter of law, but it did cost me money, keeping people from finding my non-Twitter content.
Allies of the former president are being tossed from Twitter and complaining loudly about it. Conservatives accuse the platform of “liberal bias” and want state attorneys general to go after it. But it’s a liberal, Office of Management and Budget (OMB) nominee Neera Tanden, who is having her career scuttled by old tweets.
Speech Is Dangerous
CEO Jack Dorsey says 80% of Twitter use is outside the U.S. There, Twitter faces a harder balancing act. The company claims to be taking a tough line in favor of speech, and while it may have law on its side, it doesn’t have power.
India’s government, for instance, forced Twitter to ban critics of its agriculture policy after threatening to imprison employees. India is technically a democracy. Most countries aren’t.
Dorsey wants to grow his user base by 20% this year. Much of that gain will have to come from places where the government is even more repressive than India.
And it’s not just politics that’s controversial. For example, tweets about birds in Manhattan have birders going after the tweeter for endangering the birds.
Make Them Pay
For analysts getting nervous about monetization, Twitter is looking into subscription income for “premium” features like Tweetdeck, which is currently free. The hunt is on for new revenue from tips, customizing user pages and the ability to “undo” tweets.
The company might also charge for allowing longer-form posts, analytics, ad-free services and account verification, the prized “blue checkmark.” Twitter has also bought a newsletter company, Revue, to compete with Substack and other monetizable content. However, “Will you be forced to pay for Twitter this year?” is not a headline the company wants to see.
The Bottom Line on TWTR Stock
There is promise in what Twitter is doing. There is always promise.
But there is seldom performance. Twitter has always been marginally profitable. Its best year was 2019, when it earned $1.46 billion, $1.87 per share. Revenue growth in 2020 was just 7%.
Reporters love to talk about Twitter being bought out by a company like Amazon (NASDAQ:AMZN) or Facebook (NASDAQ:FB). But Twitter is overpriced right now, and these companies aren’t greater fools.
I’ll recommend TWTR stock only when it shows consistent profits.
At the time of publication, Dana Blankenhorn directly owned shares in FB and AMZN.
Dana Blankenhorn has been a financial journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.
