A Long Long Time Ago… Really it was just on November 7, 2013, Twitter (TWTR) proved to be a failure for many primary investors with its less than stellar IPO performance in the first 24 hours. The Social Media giant had an opening price per share of $45.10, which was great for those initial investors who were able to buy in at just $26.00 per share the evening prior; but its value per share at market closing on November 7, 2013, was slightly less than that, being $44.90. That’s just a $0.20 decline in price per share for those of you who were expecting more.
However, that small amount adds up for those who purchased the stock expecting the psychological phenomenon of Initial Underpricing to take some effect. This market behavior of underpricing a security expects that a company’s stock price will be higher at market closing than the IPO’s value that same day in the morning.
Unfortunately the disappointment doesn’t stop there. For those investors who decided on holding their shares of Twitter in hopes that the security would perform better in the long-run, they’re the most hurt. That’s because Twitter actually did improve massively in the next month to reach its max closing price of $69.00 per share on December 30, 2013. The 53.67% increase in share price for Twitter appeared to be nothing more than a false valuation as the company’s share value began its legendary plummet that we recognize today. Minus two share price increases in September of 2014, and April of 2015, Twitter’s stock value has been a scary roller coaster to say the least.
… Which now that brings us to present day. The Market closing for TWTR was a measly $24.30 and the security has definitely seen better days despite its let down of a past; but I think now is one of the first true times to “buy” if there ever was one within the last few years.
I’ll tell you why:
Officially accepting the role of CEO for Twitter in October 2015, Dorsey has a laundry list of things to change for the tech company that will most assuredly pay off in the long-run. In his interview with the International Business Times, he speaks out about them in detail. These are the main points of concern that were covered:
I know what many of you are thinking about the management change, yes Dorsey has proven himself to be apart of the management problem in the past (which unfortunately has signaled huge SELLS in the market after he speaks), and his over optimism about the financial state of Twitter has been off-putting. None of that means he is in the wrong though. Alex Pitti from Seeking Alpha gives his opinion of what should have been stated by (then interim) CEO Jack Dorsey in the summer of 2015 about Twitter:
“Twitter isn’t difficult to use. It just takes too much effort to find quality content. Twitter must lower the amount of clicks/time it takes to find the information you need to know and love to enjoy. Twitter is already the best/fastest news source in the world. It just has to improve to get more users to understand this capability.“
This key fact is probably the most important part of Twitter that should appeal to any investor considering if the product is faulty. The truth of the matter is that it isn’t broken. It just has been sold incorrectly to the public since 2013. The original social media platform was never designed to earn revenues the way it is and can today. What makes matters worse is that management in the past year has been spotty and left the market wondering if the long-term value of the company will ever get back on track. It has lacked a drive and leadership that other similar companies seem to fully embrace – Facebook (FB) and Linkedin (LNKD) for example.
Now with a figurehead, a plan that makes sense, and key acquisitions such as Twitter’s purchase of video streaming platform favorite, Periscope, it shouldn’t be too hard to see how the value of Twitter will be on the rise in the near future. Twitter closed yesterday, December 17, 2015, at $24.30, one of the lowest prices it has ever recorded since its IPO; however I see this as the buy of a lifetime.
The graph above shows the number of ttter users as compared to the yearly growth of the company. Approximately 320 million monthly active users are seen as engaging with Twitter. This is pretty good for a company that on paper has looked terrible in the past year and even until October.
There’s also no doubt also that the Twitter’s massive purchase of Periscope won’t show investors any positive, monetary reflection of this buy until way into the Long-run either. That’s why when you look at this security, you just have to realize the potential and the path it is on so far. It has weakness in the price now due to poor management, aggressive acquisitions, and some of the worst CEO interviews I’ve seen, but that doesn’t mean the company’s performance will be forever off.
Twitter is a long-term investment that’s pretty affordable to own right now. Take the opportunity to seize the stock at a price that can only go up from here. That’s exactly what I just did when I bought 10 shares this morning via my Individual Investment Account with E*Trade. It’ll be a long journey maybe, but one I’ll be very glad to follow along on.
As for the answer to the Title of this blog, I think it’s a sure thing that I would recommend a big BUY for this security, but I’m not alone. Analysts for Yahoo Finance have been struggling with Buy or Hold recommendations since July 2015. It’s apparent that the market recognizes potential value in the company’s shares, but now it’s just a matter of seeing that value unfold in 2016.