Does the Gnip Deal Make Twitter Inc. Stock a Buy?

Three Fools take to the Internet to assess whether more data means more gains or Twitter Inc. stock.

Apr 17, 2014 at 10:11PM

Twitter (NYSE:TWTR) stock has reversed course in recent days thanks to its purchase of social data supplier Gnip. Should investors expect the rally to continue?

Host Ellen Bowman puts this questions to Fool analysts Nathan Alderman and Tim Beyers in this week's episode of 1-Up On Wall Street, The Motley Fool's web show in which we talk about the big-money names behind your favorite movies, toys, video games, comics, and more.

Tim says that Twitter is buying a company with expertise in gleaning intelligence from its raw data feed. Intelligence that it can then sell to those who depend on social data for better marketing and advertising, such as TV networks.

Investors shouldn't get too excited, though. Data licensing accounted for just $15.1 million, or 8.9%, of Twitter's third-quarter revenue -- down from 24.5% in the third quarter of 2011. The message? CEO Dick Costolo may not be chasing growth so much as protecting the bits and bytes flowing through Twitter's "firehose," as Gnip calls it, from the prying eyes of competitors.

Nathan adds that, even though we don't know what price Twitter paid, the deal is strategic for two reasons. First, acquiring Gnip means cutting out the middleman. Twitter gets immediate access to tools for analyzing data it can then use to help sell higher-margin ads. Second, Gnip also uses public data to examine the effectiveness of competing networks. Turning the tables on the likes of Facebook and subsidiary Instagram could prove lucrative in the short term.

Now it's your turn to weigh in using the comments box below. What did you think of this deal? Are you more or less optimistic about the prospects for Twitter stock as a result? Click the video to watch as Ellen puts Nathan and Tim on the spot, and then be sure to follow us on Twitter for more1-Up On Wall Street segments and regular geek news updates!

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Neither Ellen Bowman nor Nathan Alderman nor Tim Beyers owned shares in any of the companies mentioned in this article at the time of publication. The Motley Fool recommends Facebook and Twitter. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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