Summary: ON SALE
Score: 11/20
MOS: 90%
Share Price: $35
Sticker Price: $358
What happened on July 15? If you didn’t see, a major Twitter hack occurred. Elon Musk, Bill Gates, Joe Biden, Barack Obama, Jeff Bezos, and many other high profile individuals were hacked yesterday. They all had a message on Twitter stating “I’m giving back to the community. All Bitcoin sent to the address below will be sent back double! If you send $1,000, I will send back $2,000. Only doing this for 30 minutes.”
Very bizarre. How did this happen? We’re not 100% sure, yet.
Right away I think about a cyber security breach which can cause a stock to drop significantly overnight. In this case, Twitter quickly resolved the issue and the stock remained unchanged. I found that surprising.
Let’s take a closer look at the stock…
Twitter generates revenue two ways:
1. Advertising. Advertising is the most popular revenue stream for social media platforms. In the case of Twitter, advertising revenue has increased by 14% over the last year.
2. Data Licensing. Don’t worry, Twitter does not sell email addresses or personal information, it sells posting and sharing behavior. Big businesses will pay enterprise subscription fees to Twitter to see what millions of people are talking about every day. It’s a great way to quickly understand the market and build products and services to serve the needs of the market. This segment is growing by 35%. That’s impressive and that’s what makes Twitter unique from other social platforms.
That sticker price of $358 is very interesting. Can Twitter actually go that high?
When you look at Facebook, which has a share price of $240, $358 doesn’t seem out of reach.
Aside from the Data Licensing play, Twitter CEO Jack Dorsey has stated that Twitter will ban all political ads. This will sacrifice immediate revenue but this is a very wise move. Good on him for staying out of politics.