Will Twitter Stock Move Higher?

Twitter's changes in management along with newer revenue drivers might drive incremental upside in its stock price.

Jul 7, 2014 at 11:59PM

Twitter (NYSE:TWTR) has seen a good recovery in its stock price over the past few months, up from a dip below $30. However, the price is still extremely volatile as the company undergoes numerous changes. The company announced significant changes to its management team and is also focused on driving up revenues from newer sources. These two factors might drive up Twitter's fortunes in the future. 

Management shuffle
The social media company has recently gone through a number of changes to its leadership team, which might be a positive for the company's strategy in the future. Twitter's COO Ali Rowghani resigned from his role, however, he will continue to be a strategic advisor to the CEO. The COO's responsibilities will be assumed by others in the company's ranks. 

In addition, Twitter hired a senior TMT investment banker from Goldman Sachs, Anthony Noto, to be its CFO last week. And Twitter's old CFO Mike Gupta will be moving into a new position called Head of Strategic Investments. The Old CFO will likely be leading Twitter's future strategic investments in the related social media and technology verticals space. And also having a leading banker as a CFO will be very beneficial for Twitter due to the relationships that person will be able to bring to the table. 

And as a result, Twitter is a lot more likely to go on a small-scale acquisition spree just like Facebook did in 2014 so far. Facebook continues to dive into newer arenas as the company acquired video ads technology company, Live Rail recently. And Twitter is likely to go on such a hunt with after its big shuffle in its management ranks. 

Future drivers
Besides the big overhauls in its management line-up, the company can grow revenues from at least two other sources -- by increasing ad loads on its platform and by growing its mobile advertising network, MoPub. Investors are however, concerned about the growth of the company's user base and engagement. 

Twitter's monetization of its own platform can see a significant boost in the future because the company's ad load is a lot lower relative to its peer Facebook. In other words, Twitter can increase the number of ads it shows on its micro-blogging site substantially without negatively impacting the experience of users. And as a result, Twitter's average revenue per user (ARPU) has the potential to rise to much higher levels.

In the last quarter, Twitter's ARPU stood at just shy of $1 per user. On the other hand, Facebook's ARPU in Q1 2014 stood at $2 per user, in spite of having a significantly larger customer base compared to Twitter. So with growth in ad loads on its platform, Twitter can potentially reach Facebook's quarterly ARPU level of $2 per user, without having to reach 1 billion plus users like Facebook. Twitter can come up with more ad products geared toward media and entertainment on its platform because of the real-time and conversational nature of Twitter. 

In addition, Twitter can significantly grow its revenues and earnings off-platform through MoPub. The mobile ad exchange is already one of the largest in-app ad exchange, and considering the growth of mobile devices and app development worldwide, MoPub has a significant runway of growth ahead. Just recently, MoPub signed a $230 million two year deal with ad agency Omnicom. 

As a result, there is sustained business momentum for Twitter, and it can continue its robust revenue growth without significant growth in consumer adoption. However, analysts and investors alike tend to be focused on evaluating Twitter's future prospects on user growth and engagement levels. 

Going forward
Twitter is still being used extensively around the world, and its newer revenue drivers can make meaningful contributions to the company's revenue growth trajectory. Twitter made a number of user interface changes to its site and that can be pre-cursor for sustained user engagement in the long-run.

Twitter's management laid out revenue projections for Q2 2014 to be in the range of $270 million-$280 million. And that implies a year-over-year revenue growth rate of more than 100%. And with the help of other monetization drivers like MoPub, Twitter can possibly sustain its high growth rate story for a few more years, and in the process make the company a lot more valuable. 

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Ishfaque Faruk has no position in any stocks mentioned. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers