Stock Analysis & Ideas

Twitter: New CEO and Web3 Innovation

Many tech stocks have had quite a run, and while recent consolidation is healthy, there are a few that are starting to look quite attractive.

One such company is Twitter (TWTR) which has undergone significant changes in recent weeks. The company has been languishing around 52-week lows and I’m bullish on the company at current levels.

Jack Dorsey Steps Down

First, let’s talk about the abrupt change in leadership. In late November, founder and CEO Jack Dorsey announced he was stepping down and that CTO Parag Agrawal was stepping into the CEO position.

Twitter’s stock price initially soared on the news, up as high as 11% on the day of the announcement. However, that euphoria quickly faded and the stock ended the day down by 2.7%.

Since the announcement, Twitter’s stock price has shed a couple more hundred basis points and is sitting on losses of approximately 5%. In general, analysts were bullish on the announcement.

For starters, Agrawal is well respected and has all the tools necessary to usher Twitter into a new era. Likewise, Dorsey has often been criticized for being a little too stretched between his numerous endeavors which includes being the current CEO of Square (SQ).

As such, this news was welcomed by those wanting a CEO whose sole focus is getting Twitter to perform on par with its big tech peers. An analyst from Piper Sandler put it simply: “TWTR should benefit from a more focused, full-time CEO.”.

On the flip side, it was also cautioned that Agrawal is not “well known to the investment community, and it will take time to understand his plans.”

Faster Pace of Innovation

Agrawal wasted no time unveiling his immediate focus which was highlighted by the need for efficient execution. Twitter has often been criticized for its slower pace of innovation and inability to appropriately commercialize its platform.

The newly appointed CEO also re-iterated its goal to reach 315 million daily users and double its revenue by 2023.

Agrawal will have much work to do and at the end of the day, shareholders will make a direct correlation between success and their returns.

Web 3.0

What opportunities exist for Twitter? Outside of securing a bigger slice of advertising revenue spent on social media advertising, the biggest opportunity Twitter has right now is Web 3.0.

Web3 is largely considered the next step in the evolution of the Internet, and is focused on decentralization. Think the blockchain — which enables Non Fungible Tokens (NFTs) — and cryptocurrencies.

There is huge opportunity here, and Twitter is already at the forefront of innovation in the space. Specifically, there are three initiatives that will lead to more adoption of its platform by the Web3 crowd.

First, the company has introduced a tipping functionality using crypto. While it is has not yet been deployed worldwide, early results are proving to be quite promising.

Second, the company has recently launched Twitter Spaces which is quickly becoming the go to place for creators to launch their NFT products, talk shop, and build their communities. It has already begun to cannibalize Clubhouse, which is a popular audio conversation app used by artists. 

Finally, the company is beta testing a feature that will enable the Web3 crowd to have verified personal profile pictures (PFPs). This is a big one and is flying under the radar.

According to a Twitter spokesperson, “NFT authentication will come in the form of a badge, shown on profile pictures, marking the owner’s NFT as authentic.” 

This will add credibility, and further Twitter adoption by those in the space.

To conclude, having a more focused CEO with the technical expertise to drive Twitter toward Web3 innovation is a good thing. The company already has a head start on some of its competitors and if it can capitalize, Twitter will be well positioned to reward shareholders.

Wall Street’s Take

From Wall Street analysts, Twitter earns a Hold consensus rating, based on five Buy ratings, 16 Hold ratings, and two Sell ratings.

The average Twitter price target of $66.81 puts the upside potential at 51.6%.

Disclosure: At the time of publication, Mat Litalien did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

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