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Twitter Inc. (NYSE: TWTR) is about to make some serious improvements to its product, and that could make the stock a breakout candidate.
For years it seemed like the only update that Twitter made was giving you the ability to send out 280 characters, doubling the previous limit of 140 back in 2018. For most people, that was fine. It was a website to see what was going on in the world and get real-time updates, oftentimes before news even broke.
But the lack of updates showed in its stock price. After going public in 2013 and popping quickly into the $60 range, it spent a big part of the last seven years below its IPO price, even falling into the mid-teens, a drop of over 60% from its IPO.
It is hard to believe, but we are finally back to highs after almost eight years.
And it could be just the start thanks to some long overdue innovations.
Here's what Twitter is up to and why it's a top tech stock to buy right now...
Twitter Is Seriously Growing Earnings
Twitter's stock price has been up and down over the years. During the pandemic, revenue growth declined for the first time since 2017.
But as the year progressed, Twitter has managed to grow and reach a record quarter with $1.3 billion in revenue, up 20% year over year. This was possible with the progress it made with brand and direct response ads and a 27% increase year over year of average monetizable daily active users (DAUs). Twitter now boasts 192 million users after seeing some of its best user growth in years.
Like many pandemic-related trends, this one is going to stick around even after the crisis ends.
Now Twitter is building on it with some new initiatives.
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Twitter Is Creating New Products
Today we are seeing a bigger push than ever into new products, and it's working. Twitter saw how big Clubhouse was and rolled out Twitter Spaces at breakneck speed. This offered its users the ability to host and listen to chats by anyone on Twitter and put it front and center at the top of everyone's feed for easy discoverability. Unlike Clubhouse, Spaces is already available on Android and iOS, with plans to roll it out on desktop.
It also saw the growth in newsletters and acquired Revue, a platform similar to Substack. Twitter saw the value of how users were interacting and posting about newsletters and saw the ability to help build a creator ecosystem.
While it is still early and we are yet to see how successful these new products are, this is the most innovation we have seen from Twitter in years, and it looks like engagement is improving. These products also tie in very well with Twitter's main feed and create an ecosystem of products, much like Facebook has with Instagram.
While every product may not receive 100% positive feedback, Twitter is still showing that it can add features. A great example is Fleets, a feature that allows you to post tweets that disappear. Testing these new options also helps the company to understand what its userbase is looking for.
Twitter has also announced other products it is working on to drive revenue, like "Super Follows," which will allow users to charge followers for extra content and could potentially be introducing a tipping feature to help content creators stay on the platform.
Why This Makes Twitter Stock a Buy Now
With all the new products and an improvement in ad formats, Twitter could be set to improve on all fronts.
At its most recent analyst day the company discussed the goal of 315 million mDAUs and revenue of $7.5 billion in 2023, which would be double where it is at now.
With Twitter expected to release Q1 2021 earnings later this month, I would wait to hear more about how these products are progressing given the almost 200% move in its stock price since last March. If the numbers look good, Twitter could continue to run even higher.
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About the Author
Alex Kagin is the Director of Technology Investing Research at Money Map Press. He has spent the last decade working in equity research, most recently with Energy Capital Research Group (ECRG), where he led technology stock research along with working as part of a team developing a customizable financial data platform for securities analysis.
Prior to joining ECRG, Alex spent 8 years at DeMatteo Research, a boutique primary research firm and broker-dealer servicing the institutional investment community. He managed the Tech, Media, and Telecom vertical where he spent time connecting with hundreds of tech executives and hedge funds to get the pulse of the market.
Alex has a B.S. in Economics from American University and previously held Series 7 and 63 security licenses.