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Why Twitter Stock Price Makes it a Good Investment 2

Why Twitter Stock Price Makes it a Good Investment (Part 1 of 2)

Tweet Tweet Tweet. In this 2 part article, I will state why I feel Twitter is a good investment.

For centuries, the meaning of the word “Tweet” in the English language has been;

 

“the chirp of a small or young bird.”

 

In the modern world context, a Tweet can also be a short message sent via the app Twitter.

In our disruptive world, new habits are increasingly being formed. In the past, advertisers have to post their advertisements on newspapers or television networks.

The reason is because newspapers and television networks are places where people refer to for information or entertainment, hence, they have a fixed number of audience.

In the past decades, the two industries were increasingly being challenged by the up-rising of the so-called “tech” companies, most famously the FAANG (Facebook, Amazon, Apple, Netflix, Google) in US. Or in China, the BAT (Baidu, Alibaba, Tencent).

Well those are the big, famous and mostly profitable companies. And of course, the multi-baggers companies. Below the radar, I feel that we can spend some time looking at Twitter, as Twitter may possibly prove to be a good investment. Or even their competitors.

 

Tweet Tweet Tweet

Just like any other companies that started it’s journey as a “tech” company, Twitter endured many years of losses, until now.

On their annual report, Twitter describe themselves as;

 

“Twitter, Inc. (NYSE: TWTR) is what’s happening in the world and what people are talking about right now. From breaking news and entertainment to sports, politics, and everyday interests, see every side of the story.”

 

To describe them as a business within 140 characters (as per Twitter’s limit), I will describe Twitter as;

 

“Twitter is one of the larger advertising space providers in the world. Through it’s network that spreads information worldwide, audience can be targeted by marketers.”

 

Oh gosh, 142 characters. Twitter-failed!!!

To the average user, Twitter is simply an app for one to send short and concise messages.

 

Fighting Against the FAANG

In recent years, we have seen companies being acquired by larger or forced out of business by the bigger companies. Simply because they are too big and too strong.

Hence, what makes me feel that Twitter has a place in my portfolio? Am I not afraid that Twitter will be forced out of business?

Well, after a long time, I actually figured out that Twitter has a place to stay.

What really caught my eye in the first place happened a few years ago, where train delays are a lot more common than today.

 

The Role of Twitter in Train Delays

Other than the handful of times where there were outright train stoppages, most of the train delays back then are actually not that disruptive.

They will probably increase your travel time by 10 minutes or 25 minutes. It is a very bad delay by Singapore’s standards, but in many countries, that delay would probably be hours instead. And that makes it news-worthy.

Whereas a 10-15 minutes delay will not readily be picked up by news as it is not a big delay.

Therefore, to relay the message of a short delay, Twitter proved to be a much better platform to get information, as SMRT will simply tweet the location of the delay and how long the delay will be. (Always make a mental note to add at least 10-15 minutes on top of what they says. Usually it won’t exceed that time.)

And being reported on Twitter, it becomes a proof for me to legitimately book into camp late. I can simply ask my Sergeant-major to check Twitter.

It was through these train delays that I discovered that Twitter has a role in spreading short and concise messages to the masses. Whereas, Facebook is a better place to get the full detailed story.

Internationally, the world would see the role of Twitter during US’s 2016 Presidential election, and of course, Donald Trump’s subsequent tweets such as this, with him showing off his button.

Why Twitter is Good for your Investment Portfolio - Donald Trump's Tweet

Financial Numbers

After establishing their usefulness, let’s look at the numbers.

Why Twitter is Good for your Investment Portfolio - Twitter Share Price

As you can see from the image, Twitter is now trading in the high $30 region, whereas, in 2017, it was trading in the $10+ region and $20+ region in 2018.

And with hindsight, you would think, “wasted opportunity”. Twitter will definitely be a good investment if you had just bought it just a few months earlier.

And that’s exactly what I though as well after looking at the numbers. Even though the company is not making money, it has cashflow, meaning to say that the business is operating.

Why Twitter is Good for your Investment Portfolio - EPS

Why Twitter is Good for your Investment Portfolio - FCF

From the first chart, you can see that Twitter is profitable from the full year of 2018 and their earnings has been improving every year. However, looking at the second chart, you can see that, way before 2018, Twitter’s cashflow is already positive.

Therefore, in a way, even a few years, Twitter has been giving investors a signal that Twitter, despite it’s losses, is actually worth a second look.

Especially since the fact that Twitter has always maintained their low-debt, strong balance sheet habit, thereby, making it difficult for them to go bankrupt.

Here is the first part of why I feel Twitter can be a good investment, click here for part two, where I will cover a bit on their competitors, their price charts, competitors and their challenges.

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