These days, one of the frequently investment related questions is whether we should consider to buy Twitter stock at current levels.
Different types of investors seek value in different kinds of stocks, and the final value of the investment is determined by the core idea driving the move. It is for this reason that different sectors and stocks represent value to different kinds of investors.
However, there is one element that is constant amidst everything. It is the primary catalyst for any investment decision. Most investors want to grow their wealth and log strong returns on their initial capital, and for that reason, they are ready to put their resources to try and zero in on the best buy.
So why would you consider to buy Twitter stock at current levels? With the recent surge in prices on the buyout news, many analysts are now questioning the logic of buying Twitter at current levels.
To many, the stock ceases to represent value at current levels, and they would rather wait for better entry points. On the other hand, many feel that the social network which comprises of options like Facebook, offer a lot more value. So what should be your approach? Here is a detailed analysis of the various elements of the Twitter stock and business fundamentals to help you make a decision.
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Buy Twitter Stock: Business Basics
This San Francisco based social network behemoth has become a global benchmark of self expression. Not only does it enable networking and a strong conversation module, it is also a great source of ideas and information. Increasingly, Twitter is also becoming a source of unbiased news, opinion and even live commentary. Additionally, it is also being used for microblogging and as a key marketing tool.
The company that started in the early part of the millennium has now gained traction with a
- Market cap exceeding $16 billion at the moment
- Over the past five years, it has clocked revenue well over 300%
- The 5-year net income has risen 61%
- Even if you see the EPS measure, the stock has seen a robust 23% gain in the past five years
- Capital spending too has seen a good 500% rise clearly highlighting the company’s commitment to meaningful and long-term growth.
So if investors were to analyze the basic business parameters Twitter makes for a compelling long-term story and the increasing network of subscribers only goes on to highlight the true mettle of investing in this story.
The Future News Drivers
So if the call is to buy Twitter stock, one of the greatest news pegs driving the stock would be the talks about a possible takeover by Google’s parent firm, Alphabet. This no doubt is one of the key speculations driving the stock price movement and is seen as the primary catalyst driving up the price movement in recent run. A lot of investors are tempted to buy the stock as they explore possibilities of capitalizing on the relatively lower valuations ahead of the formal announcement.
But the problem is this news is still in the realms of speculation and there is no formal announcement on the matter. So even if someone looks at buying it the problem could be there is no assurance on whether the news is actually true and that might mean that problems with valuation may surface at a later date just in case there is no truth in the run-up to the stock eventually.
On the essential news based parameter, it could be seen as an expensive buy. However, if you look at the overall contribution of Twitter to the world’s social trends, the way it has been impacting mass opinion and the marketing initiative it helps drive up, the valuations look quite reasonable and portray significant upside for the Twitter stock.
In fact over the longer-term Twitter portrays some very strong advantage and an interesting long-term story that can create significant value going forward and absolutely justifies the call to buy Twitter stock.
The business model of Twitter is unique.
- There are about 313 active monthly users accessing the site globally
- Over 100 million users log in everyday
- The registered Twitter users surpass 13 billion as of now
- The unique monthly visitors exceed 120 million
- Nearly 34% of the total Twitter users are active and log in more than once a day
- Even in a country like China where it is blocked, there is an average 10 million users who access the site.
Therefore the huge scalability potential of Twitter cannot be denied in any way. They have been continuously attracting users and their followers, and the operation module is such that it is set to rise even higher going forward. This only means that it is gaining more acceptance as a tool for further marketing initiatives and that can mean a more robust rise in earnings.
The Perception Element
Twitter is often branded as the channel for the intelligent and influential. With increasing number of celebrities and public figures registering presence on Twitter, it speaks for itself the relevance and the power a Twitter presence yields. Most times you see law makers, opinion markers and renowned celebrities all using this platform to connect with fans, make an announcement and open access to them.
It is both an extremely public and a private platform at the same time. The fact that it is a real time platform makes it a favored alternative for quick and large scale information dissemination.
Often debates and discussions on key matters are initiated on this platform and taken forward thereon. The core idea driving up the perception is Twitter’s unique positioning as the tool of the elite and enlightened. Most celebrities see it as a power means of information dissemination. However, it can boomerang to the user if discretion is not maintained in this very usage and association.
Celebrities cannot just create a mass following through Twitter but many a times their actions can also invite flak from their followers, and that truly outlines its independent nature. In many ways that justifies the call the buy Twitter stock at current levels.
Independent News Source & Key Tool for Generating Mass Awareness
For many investors, they want to buy Twitter stock to stake in the independent news peddling movement. Twitter provides equal opportunity for its users to voice their opinion for or against any specific news point. Essentially that makes Twitter a great story for taking forward your investment aspirations with an aspiration of generating robust returns going forward. The longer term prospects of this company also lie in the unique ideas it can help generate.
Twitter is also seen as an effective tool for employee retention and means of creating mass awareness. Various companies remain take forward their marketing ideas and create long standing gains for the clients. Employers can often work towards using the Twitter to predict consumer behavior. They can then deduce the outcome and launch the product line-up in accordance with the result. Perhaps in that context what works best is the fact that opinion on Twitter is much unbiased and can enable businesses to access real information.
The Point Of Concern to Buy Twitter Stock
Growth overall has seen signs of a slight slowdown for Twitter though. If you see the year on year growth, it has only seen modest 3% rise in subscriber base in the last few quarters. Given the rising popularity of various platforms on the social network arena, Twitter does not any longer enjoy the unique positioning it has seen thus far.
But if you are a long term investor who is keen to buy Twitter stock, it is particularly interesting to note that Twitter despite the relative slowdown, still is doing reasonably well. Given the popularity that Facebook, Instagram or Snapchat for that matter, has generated, there hasn’t been a significant decline in Twitter’s following. Over a point of time it has managed to also create the image where despite Facebook’s undeniable charm, it is perceived as the more intelligent medium of communication and hence more sought after.
In terms of innovation to attract more users, Twitter has been quite proactive and therefore highlights the commitment of the founding members. Be it in terms of creating easier navigation alternatives for accessing Twitter on mobiles or expanding the scope of features that now go onto even include live videos and live streaming, Twitter is now teeming with opportunities. It is all targeted towards making your social networking experience quite memorable and improving the bankability and reliability of Twitter as a chosen platform.
Investors, however, are not particularly pleased with the way Twitter has progressed this far. As a result, even market experts believe that an acquisition at this point of time could be ideal in terms of bringing along a more dynamic structure and robust growth fundamentals. It could even make room for several long lasting innovations aimed at creating a meaningful impact on the overall users and the followers alike.
The other factor why many experts are of the opinion that the buy Twitter stock call needs to be on hold is due to the recent upheaval in the top management. Many of the company’s senior executives and officials have exited or have taken a back seat. This creates unnecessary uncertainty in the overall game plan and could negatively impact the stock price movement putting the investor interest in jeopardy.
For many the prudent call would be to adopt a wait and watch policy and then take position over the longer time frame when the stock is able to generate higher returns.
Pros & Cons of Buying Twitter Stock
These arguments perhaps take us to the core point where long-term investors must thrash out the overall pros and cons involving in the “Buy Twitter Stock” call and take action accordingly. We collated views from over 50 brokerages and analysts who cover the Twitter stock and here are some highlights that can help you in taking a decision. The constructive call is to buy Twitter stock over long-term, but there are some roadblocks that investors must take cognizance of.
1) Most have put the current rating as Hold.
While the analysts feel the stock is poised for strong returns over the longer term, the near -term news points not worth exploring and taking position into. Additionally, they believe that valuations and fundamentals do not quite justify the current pricing. They see opportunities for investors to possibly enter the stock at a relatively lesser price and generate more sustainable long term benefits as a result. In this way, investors who bet on the future prospects can look for more meaningful gains.
2) With 25 Hold ratings, cautious investors are of the opinion that the stock’s price is well above fair valuation levels.
They see the average target price close to $17 levels. The fact that it is well above that level signal so investors will get a relatively attractive entry point in the stock in months to come once the uncertainty and struggle in terms of growth and management are overcome.
3) The big positive, however, is the kind of social impact that Twitter can strive to unfold. Therefore, it remains a fairly attractive play over the longer term to bank upon and take advantage of.
Conclusion: Why Buy Twitter Stock?
While the jury is still out on whether Twitter will be actually acquired by another company or not, it cannot be denied that the long-term prospects of Twitter remains intact and extremely promising. The current stock price is already pricing in the possibility of this acquisition and does not justify an additional run-up overall. Also the fact is the price that it is acquired in, it could be also much below the market price and investors can still stand to lose money despite an acquisition of the company eventually. So it means that the balance between fundamentals and valuations are not in tandem with the overall price of the stock and the investment perspective.
The core idea of the investment always relies heavily on the growth that the company promises as this alone determines the overall return prospects of the firm. The fact that Twitter in many ways is showing signs of complacency and perhaps lazy initiatives to reinvent its overall forward looking strategy is a matter of concern for cautious investors.
Innovation has to be the core point that drives a firm’s success and strategic progress. The recent upheaval in the Twitter management surely has put a near-term question on that key element driving Twitter’s prospects going forward. For sustained growth, it, therefore, becomes extremely important that Twitter has a strong strategy for growth.
Therefore, it is safe to conclude that while you can always look to buy Twitter stock for the longer term, the short-term concerns need to be factored in quite carefully. All of these factors have a significant amount of positive and negative aspects associated with the overall long term outlook. As a result, the long-term growth catalysts have t be carefully ascertained.
Cautious optimism is what will drive the investment strategy going forward. The point of entry to buy Twitter stock comes out as a crucial factor, and that alone might prove to be rather an important factor in taking a position in the stock.