Twitter (TWTR) shares have raced back into investors' good graces. The micro-blogging hub has seen its stock soar nearly 30% since bottoming out near $14 last month. With user engagement accelerating and Wall Street pros warming up to the busted IPO, we're experiencing a renaissance of confidence at Twitter.
Twitter went public at $26 in late 2013, nearly tripling off of that level shortly after its IPO. The stock climbing back to the high teens is refreshing, but obviously Twitter has a long way to go before it makes its first wave of public investors whole. However, with momentum finally on its side, it's not outlandish to suggest that the best is yet to come for Twitter.
Image source: Twitter.
Tweet dreams
Shares of Twitter are trading higher in 2017, and if that holds up, it will be the first time that the stock closes higher for the year. Twitter stock has moved sharply lower in each of its first three full years as a public company.
The stock's rally began in late April when it posted better-than-expected financial results. Revenue may have slid 8% since the prior year as monetization challenges continue, but Wall Street was bracing for a 14% decline. Twitter's adjusted profit of $0.11 a share blew through the roughly breakeven results that analysts were modeling.
There are now 328 million monthly active users on Twitter, and while that audience is just 6% larger than it was commanding a year earlier, there's something exciting happening with daily active users. Twitter has posted four straight quarters of accelerating growth in daily active users, rising from 3% to 5%, 7%, 11%, and more recently 14%.
Ad revenue growth isn't keeping up with Twitter's engagement momentum, but the turnaround is drawing attention of notable investors and content partners. Mark Cuban announced on CNBC earlier this month that he began buying shares in Twitter. The rejuvenated dot-com darling also announced several partnerships for live content, including a 24/7 business news channel through Bloomberg. Even co-founder Biz Stone announced his return to the company earlier this month.
The lovefest for Twitter isn't universal. Victor Anthony at Aegis Capital warned that his checks show sequential weakness in daily and monthly active users in April, and that the trends continue into May. With a lack of visibility on when the negative advertising trends will turn around, he sees no reason to budge from his sell rating. He has a $12 target on the shares, an all-time low if it would sink that far.
Thankfully for those long the stock, there are a lot more people starting to grow bullish on Twitter than folks growing more pessimistic. The stock chart shows that sentiment is turning, and as long as content partners and users keep flocking to the platform, it's only a matter of time before ad revenue begins to follow suit.
