If you believe in holding shares for the long-term, I’d suggest that you take a closer look at Twitter (NYSE:TWTR) stock. Well-performing stocks tend to keep on winning, and the recent strength of TWTR stock might be a good indication that the social media company’s best days are ahead of it.
Year-to-date, TWTR stock is up about 38% and Twitter stock price has increased almost 66% over the past 12 months. Let’s take a closer look at the fundamentals that are supporting the strong performance of Twitter stock.
Twitter’s Data Licensing Is Enabling Strong Growth
Twitter, the world’s best-known micro-blogging platform, is utilized by politicians, journalists and global brands. Many readers see breaking global news or the opinions of famous people on TWTR first. Yet its digital ad business has been quite controversial, since many on Wall Street have called its business model “broken.”
While the company’s latest earnings numbers showed both setbacks and positive attributes, I want to draw your attention to a bright spot, i.e., Twitter’s data licensing business, a significant revenue generator which produced double-digit percentage growth last quarter. The company’s data licensing business involves providing additional information to companies about tweets. TWTR, however, has denied reports that it sells direct messages or other private communications between Twitter users. Recently, it has started offering cheaper data access packages to smaller companies, a move that is likely to increase its revenue further.
Twitter’s high-margin data licensing revenue will be boosted by further international expansion, as the number of overseas TWTR users will increase as more people abroad gain access to the internet, especially in the developing world. On Twitter’s Oct. 25 earnings call, TWTR noted that its overseas revenue had jumped over 50%. Finally, TWTR will be able to monetize the videos on its website more effectively as it captures a higher percentage of ad spending that is moving to digital video.
Could Facebook’s Loss Become Twitter’s Gain?
Facebook (NASDAQ:FB) has been hurt by declining user growth following the digital security issues that were revealed by the Cambridge Analytica scandal. Facebook’s user losses have been accelerating, and investors seem skeptical about its ability to resolve the complex issues it’s facing.
On the other hand, TWTR stock seems to have weathered the initial headwinds of its digital security issues better, as the company has taken steps to remove fake accounts and improve user engagement. Analysts and investors are beginning to credit CEO and founder Jack Dorsey with making TWTR more relevant, even as many other social media stocks are going through a rough stretch.
The Bottom Line on TWTR Stock
Twitter stock’s 52-week price range has been $19.73 (Nov. 15, 2017) — $ 47.79 (June 15, 2018). For those investors who pay attention to moving averages, the chart of TWTR stock is flashing a “buy” message, although its oscillators are “overbought,” signaling potential profit-taking in the shorter term.
TWTR stock has been forming a base between $27.5-$32.5. Tech stocks may be volatile for the rest of the year, and I would not advocate trying to identify stocks that have bottomed; however, I think that TWTR stock is compelling at these levels. Within three or four years, investors who buy TWTR are likely to be rewarded handsomely. By then, Twitter stock could even become a takeover target.