Twitter (TWTR) shareholders had a great week as their stock gained 22% through Thursday trading, compared to a 1% drop in the S&P 500, according to data provided by S&P Global Market Intelligence. The spike put the social media giant's stock back in positive territory for 2022, up about 11% despite a 6% drop in the wider market.
It was sparked by news that Twitter has attracted Tesla CEO and influential billionaire Elon Musk as a major shareholder.
Musk has accumulated just over 9% of Twitter's shares, according to a Monday filing with the Securities and Exchange Commission. That revelation had Wall Street feeling optimistic about the stock for several reasons.
Musk might use his position as the company's biggest shareholder to agitate for shareholder-friendly moves, for example, or to shake up Twitter's growth strategy. His financial backing may help the social network take a longer-term approach to building up the business, too.
Twitter's last few earnings reports haven't given investors much to celebrate. Annual user growth has slowed to below 20% and is especially weak in the core U.S. market. Competitive networks are aiming to steal its market share by exploiting controversy around the perception that some opinions are amplified, and others restricted, on its platform.
Time will tell whether Musk's addition into Twitter's leadership circle will fix some of these issues. The stock seems expensive based on its current growth and earnings trajectory.
But Twitter still dominates key niches in the breaking news industry and drives the global conversation on many of the biggest topics of the day. Improvements to the user experience represent the company's surest path toward capitalizing on that unique market position over the coming years.