Twitter (NYSE: TWTR) Could Be The Comeback Story Of The Year
Shares of social media titan Twitter (NYSE: TWTR) are up more than 12% since the end of last month, and have had more green days in the three weeks since...
Shares of social media titan Twitter (NYSE: TWTR) are up more than 12% since the end of last month, and have had more green days in the three weeks since than their stock has had since last summer. That was shortly after shares hit an all time high and investors were expecting them to crack on with the rest of the pandemic winners, but it was not to be.
As of Wednesday's close they're down 55% from last year's high and back trading at the same levels they were at shortly after IPO'ing in 2014. This is a bitter pill to swallow for investors, but for those of us on the sidelines there are a few signs that the stock is getting sick of all the selling and is ready to start heading in the other direction.
There was a decent bounce back from a testing low in late January, and the daily trading range of shares has tightened up considerably since then. Compared to the back end of last year when there were multiple long red candles to be seen, they've all but disappeared from Twitter's chart of late. Could this be a sign that a bull run is about to start? Let's take a look at some of the reasons why we think it is.
For starters, the company's Q4 earnings, released last week, came in ahead of what analysts had been expecting. Revenue was up 21% on the year, with average daily user numbers also showing impressive growth compared to the same period last year. CEO Parah Agrawal spoke optimistically about the coming months with the release when he noted how "our strong 2021 performance positions us to improve execution and deliver on our 2023 goals. We are more focused and better organized to deliver improved personalization and selection for our audience, partners, and advertisers."
This bullish tone was matched by CFO Ned Segal, who said "Twitter had a solid fourth quarter to finish 2021, with over $5 billion in annual revenue, up 37% for the year. There are no changes to our goals of 315 million average mDAU in Q4 2023 and $7.5 billion or more revenue in 2023. Our increased focus on performance ads and the SMB opportunity after the sale of MoPub positions us even better for 2022 and beyond."
So far so good, but the cherry on top for investors was the news that the board had authorized a fresh $4 billion share repurchase program, which is effective immediately. This is one of the most bullish signals a company can give to the market, and tells us that management believes their shares to be heavily undervalued at current prices. This, as well as the core earnings figures, garnered some attention from some of the sell-side heavyweights.
The day after the release, both Susquehanna Financial and Morgan Stanley were out with positive comments and moves on their rating for Twitter. The former maintained their Buy rating, and though they trimmed their price target from $85 to $59, this still suggests there's upside of more than 60% to be had from where shares closed last night. The latter boosted their price target up to $59 as well, backing up management's view that shares are a bargain right here for investors.
It's a nice change of pace for investors who must have been getting sick of the negative headlines concerning their Twitter shares. For example, Cathie Wood of ARK fame has made no secret of the fact that her funds have been dumping Twitter shares in recent weeks, a move that might now prove premature in the face of the potential turnaround. For investors getting involved and willing to take the other side of the trade to Cathie, we could be looking at the trade of the year right here.
Having been beaten down for much of the past year, the worst-case scenario has surely been priced into Twitter stock. But as we're seeing in the company's earnings and from Wall Street, the current share price of $36 is starting to look a long way from fair value. Anyone starting a position at these levels has a pretty simple exit point below January's dip in the low $30s, but there's a lot of room for them to run to the upside.
Twitter is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.
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