TWITTER (TWTR) INVESTMENT THESIS
Twitter is an online advertising platform hidden within a niche between an interest network and a social network, but right there, in that 'in between' space where Google, Amazon, Apple or even Facebook have no presence is the power, impact
and secular trend of Twitter.
The Twitter Niche
Our first experience with Twitter was the 2018 Super Bowl power outage. For twenty two minutes, a colleague attending the game was twittering frantically with a virtual
second by second twitter feed. It was interesting to listen to the Q2 2018 Conference Call and hear Twitter CEO Jack Dorsey state,
“There were 72,000 tweets per minute at the end of Game 1 of the NBA Finals when J.R. Smith dribbled
out the clock instead of taking a shot.”... “When Serena Williams tweeted, "She took her first steps. I was training and missed it. I cried." it prompted an outpouring of support and started a dialogue about the challenges working mothers
face.”... “Some of the most memorable moments in the World Cup happened on Twitter, in addition to those on the field, with 115 billion impressions during the tournament.”
Admittedly, when the stockmarket has a significant move
in a short period, the first place monewiseHQ goes to is Twitter @realdonaldtrump, and if Tesla moves... @elonmusk, to see what’s happening.
And then the lightbulb goes on. This is a secular trend. Not an in your face secular
trend like ‘the Internet tsunami of things’ or Amazon the ‘retail killer’. But right there, in that ‘in between’ space where Google, Amazon, Apple or even Facebook have no presence is the power, impact and secular trend of Twitter.
INVESTMENT THESIS
The investment thesis for Twitter is founded on three areas
1.The power and impact of twitter as a direct communication tool.
This niche, in which no other platform has a competing product, is part of a secular trend
providing direct and immediate communication with access to the thoughts, ideas and opinions of millions of people.
2. Advertisement Engagement and monetization of
the platform
Advertisers want maximum penetration and conversions from views to purchases, or Click Thoughs. Twitter is still in it’s development but acknowledges the importance of maximizing advertisers return on investment,
is increasing CapEx in various areas, improving ad formats and developing Machine Learning/ Artificial Intelligence programs to improve relevance.
3. Improvements to the health of the platform translating to increased user growth.
In early 2018, the Facebook US Election and Cambridge Analytica scandals highlighted the importance of corporate responsibility in eliminating fake news, abuses of the platform, selling user data and eliminating accounts. Social media
as a whole was brought under scrutiny. Prioritizing a ‘healthy’ platform will increase long term user growth.
What does that mean at moneywiseHQ?
Twitter is a stock which offers good trade setups for Fast Trades i
the short term
There always has to be a catalyst and identifying an effective investment thesis gives Big Money Managers a reason to invest in the stock which acts to drive the shares upwards.
The stock price volatility over
the past year has come as a result of the threat of government regulation, concerns on fake news, false accounts and personal data breaches which have affected all social media companies, most notably Facebook and to a lesser extend
Google. Headlines will affect the stock price.
Growth stocks are about 'growth' in user accounts. The greater the number of accounts, the greater the number of viewers, advertisement presentations and subsequently revenue
generation. Reviewing Twitters Quarterly Earnings Reports will provide important information on the user growth rate.
Twitter has a very specific and powerful niche. The platform will evolve as management implements strategies
to strengthen the ‘health’ of the platform, deal with existing issues surrounding social media and executes on opportunities to engage users and increase monetization.
One can only speculate how long Twitter can remain in the 'in
between' space before a larger tech heavyweight like Google or Amazon decide they want to take the company over.