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 this second article, I will cover on I feel Twitter can be a good investment, namely I will cover a bit on their competitors, their price charts, competitors and their challenges. Click here for part 1.
In the internet advertising arena, the biggest are definitely Google and Facebook. However, if you look closely at how each of their apps and services works, and I could be wrong here, these are the direct and indirect competitors of Twitter in different areas.
Weibo as close to Twitter as can be, hence taking up the role of direct competitor, with perhaps WeChat and Line, being the next closest, with their ability to push out short happening news to their users at their Timeline function.
While other apps such as Tik Tok, Snapchat and Instagram are able to push out messages, they do so in a video or image form. And they can be more of a self-indulgence basis than Twitter.
In short, from a marketing and advertising standpoint, they each have their roles.
Below shows the 1 year chart of Twitter with daily candles, volume and moving averages inserted. You can see that Twitter is now trading above the moving averages and the 20 days line crossing over 50 days recently.
To Buy Or Not
Reading through their annual report and latest earnings transcript, we can see that Twitter has been doing things to improve and streamline their operations through artificial intelligence and deep learning.
Mainly removing spam contents and fake accounts. While increasing their ads engagement and reducing cost per ad. This can only be good for the company.
With low debt and profits coming in, Twitter, trading at PE 23 seems quite decent for a company with future growth potential.
Although the technical charts shows Twitter’s price dropping back down after the high post-earnings, Twitter has broken through the previous resistance and seems poised to stay that way.
Twitter has for years, establish their network and now are able to properly monetise their network. Therefore, I feel that it is worth to give Twitter a try in a stock portfolio, for all you know, it could just fly into a multi-bagger.
Users of Twitter
By and large, Barack Obama is the first politician to really use Twitter to huge political impact, after which, Donald Trump used it to move the stock market up and down.
Using a new phenomenon called Twitter Diplomacy, it seems like in future, the use of Twitter in politics could continue.
Other than politicians, looking at the top accounts on Twitter, celebrities are using Twitter extensively as well. Thus, showing that Twitter has it’s own role as well.
What Can Go Wrong?
Presently, what are the things that I feel can go wrong with Twitter? The things that can change Twitter from a good investment into a bad investment.
- GAAP vs non-GAAP earnings
As with many companies that IPO on Wall Street, the preference of non-GAAP figures by management is something that we as investors needs to take note of. It is not wrong for management to refer to non-GAAP financial figures.
Although investors are assisted by GAAP figures as well, I feel that it is important for investors to simply have this at the back of our minds. Not a big issue, but good to know.
- Data Breach & Fake Account Fines
As with many other social media companies, Twitter faced the increasing scrutiny of data breach and fake accounts.
We have seen in the scandal of Cambridge Analytica where social media accounts can be utilised to manipulate political results.
In the past, if a country wants to spread fake news or create trouble in another country, they have to send some people down to the ground to spread fake news.
Two very different cases of how social media apps are used to spread news with vastly different consequences.
By which, governments of the world are working hard to clamp down on such issues. And social media companies are also working hard to remove such accounts.
These will continue to be a continuous fight and could potentially be a costly fight as well.
- End of Popularity
It is important that celebrities, politicians and news agencies continue to take up Twitter as a platform to engage the public. In this way, more users will download Twitter, thereby, increasing Twitter’s network effect and Twitter’s ability to monetise their network.
Granted that Donald Trump is showman even before he becomes president (remember, You’re Fired!), and he has provided loads of entertainment to us, the public, throughout his presidency.
However, the future of Twitter will be bleak if public figures do not continue to take up Twitter as a platform. If there is a mass exodus of public figures somehow, then will Twitter be heavily affected?
I believe so.
In other words, if there is something that pops up in the future that can take a similar role to Twitter for celebrities, politicians and news agencies, and that something can do Twitter’s role better than Twitter, then it can be trouble.
By then, in all honesty, it is a bit hard to see that happening. Although it is not impossible.
Through this two articles, I have wrote my thoughts on why I feel Twitter can be a good investment. It does not constitute a buy recommendation, and simply my opinion and thought process.
Do you think I am right? Or am I missing out on something?