It has been a somewhat tumultuous year for Twitter (NYSE:TWTR) ranging from their well publicized security breach to their rumored interest in purchasing TikTok. Jack Dorsey’ company has been one of the major platforms of communication and connectivity throughout the novel coronavirus pandemic, and the stock performance has reflected just how integrated Twitter is into our digital society.
Twitter’s stock price has been steadily on the rise since taking a hit after the company had to deal with the aftermath of a security breach that left some of its more high-profile users vulnerable to attack. Since the attack happened on July 15th, the stock is up nearly 10%, pushing up towards its 52-week high. Their most recent earnings call wasn’t great but it wasn’t terrible, and it did provide some insight on what the company has planned for the future. Year-over-year MDAU or monetizable daily active usage was up nearly 35% from 2019, most likely due to the increase in usage during the COVID-19 quarantine.
Perhaps the most interesting part of their call was the teasing of a rumored paid subscription service for Premium Twitter users could be in the works. What this may look like still remains to be seen as Twitter is a free service that depends on UGC or User Generated Content, which is again not easily monetizable. UGC is already free on any social media platform including Facebook (NASDAQ:FB), Instagram, and Snapchat (NYSE:SNAP) so this may cause a migration of users away from the platform. Twitter does not create their own original content either like Netflix (NASDAQ:NFLX) or Disney+ (NYSE:DIS), another reason why it would be difficult for them to charge their users a subscription fee.
Twitter has also recently been linked to the U.S. rights to TikTok, a subsidiary of Chinese company ByteDance that has taken the social media world by storm. President Donald Trump has ordered that the American rights to TikTok be sold to a stateside company to avoid any sort of cybersecurity issues that were present when ByteDance ran the app. Twitter is currently in a bidding war against heavyweights like Microsoft (NASDAQ:MSFT) and Oracle (NYSE:ORCL) so investors should not be too optimistic, even though Twitter would seem like the most natural fit. The company previously had their own version of TikTok called Vine, which was briefly popular although Twitter pulled the plug on the app in 2016.
So what does the future of Twitter’s stock hold? After its earnings report eight analysts have rated the stock a buy while 29 recommended a hold, and only four rated it a sell. Much of the subscription service revenue and excitement around a possible TikTok acquisition has been baked into the current stock price. While both things could be profitable for the company, Twitter’s true revenues will always be tied to their ad revenue and not a subscription service. TikTok could be a boon, but it could also fall on its face as Vine did not five years ago. Twitter has always struggled to monetize their product despite its popularity around the world and investors will want to monitor the stock as the ongoing TikTok negotiations continue.
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