Why Are Twitter Shares Soaring?
Haris Anwar | Mar 02, 2021 08:16
Twitter (NYSE:TWTR) stock is on fire. Shares have climbed more than 40% in the first two months of 2021, far outpacing the gains of rivals. This unexpected surge has pushed the stock of this social media giant beyond even the level seen at its 2013 initial public offering.
Twitter, which closed yesterday at $77.63, has more than doubled during the past 12 months, adding 130% in value. During that period, Facebook (NASDAQ:FB) shares have increased 35%.
So, what has made Twitter stock desireable once again after it had been in the wilderness for several years?
The answer: the micro-blogging app’s strong earnings momentum and the company’s ambitious growth plan, which is gaining a lot of traction.
For the quarter that ended Dec. 31, the number of Twitter daily users climbed to 192 million from 187 million in the third quarter. This included an impressive 1 million additional users in the U.S. alone. Twitter produced about 20% growth in daily active users for five straight quarters and has projected it will do so again in the current period.
Behind these successes are Twitter’s turnaround efforts, which started soon after the 2016 U.S. elections. During that period, Twitter drastically improved its product, aggressively moderated its content and cleaned its platform of abuse and toxic content.
h2 Trump Ban Not Affecting Growth/h2With strong user growth, the company also informed worried investors last week that banning former U.S. President Donald Trump from its platform in January is not having any negative impact. The permanent ban on Trump tweets, the platform’s most followed personality, triggered predictions of massive losses in users among the 74 million Americans who voted for him.
Clearly, that hasn't happened. In early February, Twitter told investors that it added more daily users in January than the average number it had gained in that month during the past four years.
KeyBanc analyst Justin Patterson, one of the most optimistic analysts on Twitter stock, sees a “full swing” recovery in Twitter’s advertising and continued success in boosting audience engagement and advertisers. Patterson has an overweight rating on the stock, with $80 a share price target.
Twitter stock got an additional boost in the past week when the company presented its three-year growth plan to analysts as part of its push to speed up its new product rollouts amid criticism that CEO Jack Dorsey has been too slow in launching and testing new products.
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The company's first “Analyst Day” since 2014, held on Feb. 25, outlined a number of ambitious goals, including doubling revenue and adding more than 120 million new users over the next three years to reach at least 315 million by the end of 2023.
Twitter also plans to launch a newsletter subscription service and an audio product named Spaces to challenge Clubhouse, a rapidly-expanding audio app valued at $1 billion in a recent round of funding. The newsletter initiative, called Super Follows, is designed for influencers with large audiences and will provide an opportunity to receive payments for their content.
Bottom Line
The rally in Twitter stock shows that the company is succeeding in turning its platform into one that advertisers increasingly value. Investors are also liking the company’s new initiatives, which could fuel further growth in its sales and user base.
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