I have to admit – I was skeptical about Twitter’s (TWTR) future. It looked like it had some of the biggest disadvantages going into a wider social media conflict, and how it was going to make money was largely beyond me. Getting a look at some of the new ideas, however, is turning that around.
The company notched up 1.5% in premarket trading on Thursday and kept the gains going into the trading session, despite overall market weakness. Fueling those gains was a new look at just how Elon Musk pulled the cash together to buy Twitter, and this—coupled with the new potential initiatives—was enough to leave me bullish on Twitter for the first time in a while.
Twitter looks like it’s staging a comeback. After big gains in the early going this time last year, the company held it together until late October. That was when the bottom fell out, and the company started a steep dive that cost it about half its value in the space between October 2021 and March 2022. That’s when the recovery started.
The latest news seems to be sparking investor attention. A series of 13-D reports emerged from the Securities and Exchange Commission that Elon Musk pulled together $7.14 billion in funding to back up a $44 billion takeover of Twitter.
A coalition of investors was sufficiently interested in helping out, including a longtime ally of Musk’s, Oracle (ORCL) founder Larry Ellison. Also on the list were the Binance cryptocurrency exchange and Saudi Prince Alwaleed bin Talal Al bin Abdulaziz. The prince ultimately committed his own stake in Twitter to the bloc.
Wall Street’s Take
Turning to Wall Street, Twitter has a Hold consensus rating. That’s based on three Buys, 27 Holds, and two Sells assigned in the past three months. The average Twitter price target of $50.76 implies 1.5% downside potential.
Analyst price targets range from a low of $30 per share to a high of $60 per share.
Investor Sentiment is Gravely Unsettled
The shakeup at Twitter’s top management has spread to investor sentiment as well. While some parts are wildly optimistic, others are much, much less so.
Easily leading the way for the pessimists is the hedge fund field. Based on the word from the TipRanks 13-F Tracker, hedge funds have all but completely cut ties with Twitter. In December 2021, hedge funds owned just shy of 22 million shares of Twitter. In March 2022, that dropped to just under 3.4 million shares. That represents the lowest amount seen in the last two years.
Insider trading, meanwhile, is kind of a mixed bag. Insiders bought a combined total of $2.9 billion shares in the last three months.
However, the entire month of April featured nothing but sell transactions. Sell transactions led buy transactions by 16 to 11 in the last three months. In the last year, that expands to 67 sell transactions against 24 buy transactions.
For retail investors that hold portfolios on TipRanks, the picture was much clearer: buy – frantically. TipRanks portfolios that held Twitter were up 1.7% in the last seven days. Portfolios that held Twitter in the last 30 days, meanwhile, were up 22.3%.
Twitter’s dividend history, however, is a complete blank. There is no history available, nor are there plans to start one.
A Huge New Initiative Ahead
I’ve expressed concern before about Twitter’s ability to make money in the future. It always seemed the most limited of social media sites, depending not so much on video or the like as much as on short text blurbs. Yet, Elon Musk seems to already have a plan to turn that around.
The first is the suggestion that governments and corporations might be getting billed for their tweets. While Musk assured onlookers that Twitter will “always be free for casual users,” those turning to the platform for marketing may find themselves getting a bill.
There are no specifics to this plan as yet, and it’s certainly not codified. However, the possibility does represent a new income stream that definitely wouldn’t hurt.
Further, the company also rolled out a slate of new content partnerships at its upfront presentation recently staged at the South Street Seaport in New York. One deal with Fox Sports will focus on the upcoming World Cup championship. Other deals are in the works, including one with NBCUniversal (CMCSA).
Deals like these should help make an investment in Twitter a worthwhile proposition. It’s already been suggested that, while Elon Musk plans to take Twitter private, it won’t stay that way forever. Some reports suggest Twitter could go public again within three years after the buyout concludes.
Concluding Views
Investors should be happy to see this. Twitter may not have been the greatest prospect before, but some of these plans are likely to have some impressive results. While current shareholders will be bought out as well—at a rate of $54.20 per share, reports note—watching for Twitter to go live once again could mean a great opportunity in the making.
Twitter today is kind of on its last legs. There’s still some gain to be realized—even at today’s prices, it’s about $4 per share from the buyout—but the future gains may come after Musk retools the company itself. It’s not just about free speech; it’s also about getting paid for that speech.
Some of Musk’s plans could be winners indeed, and that’s got me bullish. Today’s Twitter only has so much room to grow before butting up against the buyout. However, the Twitter of tomorrow could be a bigger winner than anyone expected.
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