Talk about game-changers... Back in late September, I told StreetAuthority readers about Twitter (Nasdaq: TWTR). The "other" social network, as we called it, was ripe for a turnaround -- and possibly even a buyout, which is why my premium Game-Changing Stocks subscribers and I had recently added it to our portfolio.
Whether you're a fan, neophyte or doubter, you can't help but notice that the company has now been in the news daily, courtesy of our president-elect. Donald Trump uses Twitter to instantly communicate to his 17 million followers, not to mention the media and millions of others who are looking in -- all serving to bring further attention to the platform.
The same features that made Twitter indispensable in bringing social change have already made it a political tool and quite possibly a governing one, too. As investors, we cannot ignore this development.
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Twitter is a social networking site, which means its success depends greatly on the number of active users. And while President Obama has been on Twitter since 2013, I expect that Donald Trump's more outspoken, often controversial manner will only attract more users to the service once he takes office next year.
And as Twitter's user base grows, the company should be in a better position to make money.
Of course, nobody should ever buy a stock just because your favorite celebrity, politician or even the president uses the company's services. But if a celebrity provides the company in question with large quantities of free marketing, that's a different story. And for Twitter, where sluggish user growth has been one of the biggest problems plaguing the company, free marketing of the company name and its services might be just what the doctor ordered.
Twitter's two main ways of making money are selling ads and licensing data, and the size of the company's network affects both efforts. So, anything that has the potential to help grow the size of the company's network should be viewed as a positive.
Twitter allows its users to connect with like-minded people, instantly disseminate news, as well as self-promote, and all of these traits would benefit from an influx of subscribers. And while most of this bullishness is built on speculation rather than observable changes in numbers, I'm comfortable with that speculation because it's rooted in the recent trends. Twitter is a true game-changer that shifted the social media paradigm, which makes me more optimistic about its capacity for future growth.
Granted, Twitter still has a lot of work to do -- especially when it comes to selling digital ads, the company's primary way of monetizing its user base. This has been an ongoing issue for the company and remains the biggest obstacle to future growth. Twitter has failed to capitalize on its growing popularity while rivals like Facebook (Nasdaq: FB) have taken tremendous leaps with features like mobile and video advertising. The comparison hasn't helped Twitter's struggles: TWTR is down 17% since the start of the year, while FB has gained 13%.
Let's hope that Twitter's management quickly recognizes and understands the new role of the social media as a mainstream politicking tool, and learns how to mine this development for profits. As innovative as the company is, and as popular as the service can be, we need to consider the fact that management simply might not be adept at monetizing the service. On the other hand, it might just be the matter of time before they learn to use the popularity to the benefit of shareholders.
The recent price action in the stock reflects both these lingering doubts and the new optimism. It's now less of a "Show us what you can do" story, but rather "We see your potential, and now you need to deliver." I will give the company some time to sort everything out, keeping eye on further user growth and better ad sales in the near future.
Still a high-risk investment, Twitter seems to be coming into its own, and the stock looks attractive again. And if you believe, as I do, that the likelihood for this true game-changer to ultimately reward its shareholders is high, it's now up to Twitter's management not to waste this incredible opportunity.
Note: I've predicted that Twitter's turnaround in 2017 will take investors completely by surprise. And those who recognize it now stand to gain the most. But that's just one of 10 game-changing predictions I've made for 2017 that could make investors an absolute killing in the market -- and I've released all of them in a brand new report. To get your hands on this report now, simply follow this link.