Twitter Inc (NYSE:TWTR) investors have had a really tough time in 2014. The company’s shareholders have had to deal with a low down in user growth, along with worries about the company’s monetization model, and a wider market run from momentum stocks. With the company’s shares trading at around $45, now might be the time to buy for some risk-tolerant investors.
According to a report from Sterne Agee analysts Arvind Bhatia and Brett Strauser Twitter Inc (NYSE:TWTR) stock is now rated at Neutral, and the company’s prospects are looking up. The firm previously rated Twitter stock at Underperform, and warned that user growth, engagement and valuation were negatives for holders of the stock.
Chris Hohn the founder and manager of TCI Fund Management was the star speaker at this year's London Value Investor Conference, which took place on May 19th. The investor has earned himself a reputation for being one of the world's most successful hedge fund managers over the past few decades. TCI, which stands for The Read More
Twitter product changes build user engagement
According to the Sterne Agee report the changes that Twitter Inc (NYSE:TWTR) is making to its platform are likely to drive user engagement and could result in an up-tick in user growth. Management has been proactive in adding to user engagement, and the analysts are happy with the strategies outlined in the last earnings call.
Some of the positive engagement trends include keeping ad load low, adding richer media to the Twitter Inc (NYSE:TWTR) experience, and launching more topical products to the company’s platform. Twitter needs to show that its innovations are able to keep users on the site for longer if it wants to keep the interest of investors, and Sterne Agee reckons the company’s plans look like likely successes in the medium term.
The Sterne Agee analysts “see potential for user growth and engagement to improve in the near to medium term.” the addition of Daniel Graf as the company’s Vice President in charge of Consumer Product is viewed as a positive as the company heads toward the improvement of its platform on desktop and mobile. The company is underperforming the market, however, and that provides most of the impetus behind the ratings change.
Twitter price might be buying opportunity
The intelligent investor knows that most things are worth buying at the right price. Those who were skeptical of Twitter Inc (NYSE:TWTR) at the beginning of 2014 may keep their reservations, but they have to reevaluate the stock based on changes in its price. Twitter has lost around 30% of its value since January 1. That puts it in the right range for a lot more investors.
Sterne Agee has a twelve month price target of $43 on Twitter Inc (NYSE:TWTR) stock, and the analysts studying the firm are not recommending a buy. Those investors who believe that Twitter can turn its market position into a profitable enterprise should, however, consider putting money behind that idea at the current price. Twitter has mountains of potential, but it remains a risky bet.
The momentum bust that killed Twitter Inc (NYSE:TWTR) value through the first months of 2014 shows little sign of ending. Google Inc (NASDAQ:GOOG) earnings came in worse than expected for the last quarter, and that is likely to impact market perception of internet stocks stocks in the immediate future.