Since its IPO Twitter Inc. (NYSE: TWTR) has had a love-hate relationship with investors. Founded in 2006, Twitter ranks in the top 15 most visited websites in the world. Twitter stock has traded in a range between $14 and $70 since its IPO in 2013.
Today, Twitter is a micro-blogging platform, where anyone with an account can instantly post their thoughts, images, and videos to a global audience. It allows ordinary people to connect with politicians, CEOs, and celebrities instantly. The company’s business model growth, user base, and monetization contrasts sharply with other social media platforms such as Facebook, Instagram, and SnapChat.
Twitter has enjoyed increased visibility among active traders in the last three years, thanks to Muddy Waters, Citron Research, Elon Musk, and Donald Trump, who is an avid user of the platform. Politicians, athletes, musicians, and public figures also use Twitter to weigh in on general issues. Twitter has become a tool for brands to connect with and engage their audiences on a more personal level.
What is Twitter Stock?
Twitter stock allows you to invest in this popular social media platform. As a stockholder, you can hold a small portion of the company, and you stand to experience profits and losses in line with Twitter’s success. It’s important to understand the complexities of Twitter stock if you’re thinking about making this investment. Most notably, you should know that:
- While popular, Twitter has had a long road toward realizing profitability
- Twitter has made many changes which could impact the business positively or negatively
- This is often considered a volatile stock pick
Twitter Stock – Trade or Investment?
Despite its popularity, Twitter struggles to find the best way to monetize its platform. The uncertainty that surrounds Twitter stock is what can make it such a fun stock to trade. If you are a trader, you welcome volatility because it gives you the chance to make quick profits.
On the other hand, long-term shareholders haven’t had many reasons to smile, as shares of the stock are trading significantly below all-time highs. Nonetheless, market watchers agree that Twitter will continue to remain valuable as media content consumption continues to shift away from the TV. More so, Twitter’s new features such as 280 characters and live streaming could become the key to unlocking advertising revenue.
If you are interested in investing in Twitter stock, below you’ll find a brief history of the company.
Twitter pre-IPO Days
The earliest days of Twitter date back to 2006 when Jack Dorsey had an idea for an SMS-based communication platform. Evan Williams and Biz Stone, co-founders of Odea, were also involved. Eventually, Odeo ran into some problems. An investor buyback led to the creation of Obvious Corporation. Later, Twitter became a standalone company.
Twitter experienced its first spurt of growth in 2007 when it was used at the SXSW conference. More than 60,000 tweets were being sent each day at the event. By 2008, Twitter recorded 100 million tweets per quarter. Fast forward to February 2010, and Twitter was posting 50 million tweets per day.
Before its IPO, Twitter raised more than $57M in VC growth funding. It filed its IPO with the New York Stock Exchange in 2013. Twitter’s stock gained 73% on its first trading day, closing at $44.94.
Twitter’s IPO and Post-IPO
Twitter filed for IPO in 2013. At the time, the company had 200M monthly active users who were posting more than 500M tweets per day. Twitter went ahead to list 70M shares priced at $26 apiece to value the company at $14.2B. Twitter’s stock ended its IPO day with a valuation of $31B.
Following its IPO, the company had a tumultuous relationship due to its inability to post consistent profits.
By 2016, there were rumors that Twitter was a target of takeover offers. Some of the companies that reportedly showed interest included Microsoft, Alphabet, SalesForce, Walt Disney, and Verizon. However, as with most rumors on Wall Street, these offers never materialized.
The post-IPO period of being unprofitable has led to a series of changes in Twitter’s management. Evan Williams, the CEO, stepped down for Dick Costolo, and Costolo later stepped down for Jack Dorsey. In 2017, Twitter revamped its dashboard to upgrade the user experience. The changes paid off, and Twitter posted its first-ever quarterly profit in Q4 of 2017.
Understanding the Gap Effect on Twitter Stock
Twitter can experience dramatic gaps as a result of attention-grabbing tweets. A gap is any instance where the price of a stock moves dramatically. This gap effect is particularly notable for tweets that come from the president. Tweets that are made during non-trading hours can create a significant gap between Twitter stock’s price at the end of one day and the beginning of the next. It’s difficult to predict when these gaps will occur.
What Does the Future Hold for Twitter Stock?
For the most part, if you are an early investor in Twitter stock, then it has probably failed to live up to expectations. Twitter stock news was largely disappointing in the company’s early years. However, if you are a savvy trader, Twitter stock has offered plenty of opportunities to make money.
The company spent a great deal of the last decade refining its product, business model, and monetization strategy. In Q3 2018, it posted a profit for the fourth quarter in a row. Twitter is now consistently profitable, a trend the company naturally wishes to continue. This makes it likely that the Twitter stock price will rise.
Twitter CEO, Jack Dorsey in a statement accompanying the Q3 results noted that “We’re achieving meaningful progress in our efforts to make Twitter a healthier and valuable everyday service…We’re doing a better job detecting and removing spammy and suspicious accounts at sign-up.”
Twitter has made some strategic acquisitions that might prove to be invaluable in the future. For example, it bought Vine, a video sharing service for $30M in 2012. In 2015, Twitter acquired Periscope, a live video streaming platform for $100M. Both acquisitions suggest that Twitter has the technology and talent to make a push into live videos.
Also, Twitter has grown to become a significant player in the media as a source of news reporting, information dissemination, and curation of perspectives. Twitter still has enormous potential as a second screen where people engage and share their thoughts during political, sporting, entertainment, and economic events. It’s worth considering if you’re looking for new stock opportunities.
Some institutional investors are bullish toward Twitter stock. That said, as much as 65% of institutional investors hold Twitter’s total shares outstanding. Now, while the future of Twitter stock seems uncertain, it remains a favorite among active traders. If you want to take your trading to the next level, and learn what separates consistently profitable traders from the rest, consider signing up for one of our webinars to improve your trading game.