In 2017 Is Twitter Worth Investing In?

In November 2013 Twitter officially became a publicly traded company, about a year and a half after its rival Facebook did the same and seven years on since it was created. There was plenty of strong investor demand, with the share price opening at $45.10, up from its initial IPO pricing that was set at $26 due to strong investor demand.

At the start of 2017 it’s not quite as positive a picture for Twitter. From being valued at a high of $40 billion in 2013 to just over $10 billion in 2016, it hasn’t all been plain sailing. Still, it is trying to make a strong investment case and could be worth adding to your portfolio.   

Current Performance

On the 9th February Twitter will release its Q4 earnings, hoping to provide a boost to its share price. The company has a good history of beating analyst expectations and it will be looking to do so again as its stock has mostly been trading in line with analysts’ consensus.

In Q3 of 2016 Twitter posted revenue of $616 million, which was an 8% increase year-over-year and a change in profit of $0.13 a share. Monthly active users also increased by 3% to 317 million compared to the previous quarter. While these numbers seem positive, others were less so. Twitter posted a GAAP new loss of $103 million (or $0.15 a share) and continued to be a loss-making company.  

There were staff layoffs as well, as the firm aimed to increase profitability. Understandably this can put off many potential investors and the smart move is to wait until Q4 reports are released before making a decision. Yet if the share price does fall it could be worth the risk to invest and back a more positive future for the platform.

Potential Takeover and Changes

One factor that saw Twitter’s stock rise before falling again throughout 2016 was the persistent rumours of a buyout or takeover. Every time the rumours turned out to be false its stock immediately fell again. There is still a chance that Twitter could be bought out in 2017, but as a company valued at over $10 billion the process would take time. Rumours of an acquisition alone will boost its share price.

While there have been changes to the Twitter business model over the past few years, the platform is still struggling to monetise, especially compared to rivals such as Facebook. Cost issues need to be dealt with and experimentations with methods of monetising the platform furthered for it to improve its performance, which may require a change of CEO, according to some investment experts. 

Other Public Social Media Companies

If you’re unsure about investing in Twitter, there are various other social media companies which are publicly traded and opening a stocks and shares ISA is a great way to take advantage of these. Facebook is the big one (owning Instagram, Messenger and WhatsApp as well) and valued at around $62 billion, dwarfing that of Twitter.

Yahoo! Inc. are another option, owning Flickr, Tumblr and other online assets, while Alphabet Inc. are the company behind Google+. There are many big Chinese social media platforms such as Weibo Corporation, Renren Inc. and more that can be a great addition to diversify any portfolio.

2017 could see Twitter return to form if there are big changes, positive results or a takeover, although it could still pose an investment risk should it continue to stagnate somewhat.