00.00 | Instrument:TWITTER |
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Twitter is a popular social networking and microblogging site that allows its users to communicate with short messages known as ‘tweets’. The company is headquartered in San Francisco, California, US. It was founded on March 21st, 2006 by Jack Dorsey, Noah Glass, Biz Stone and Evan Williams. Initially, three of the founders were working on an ‘Internet radio’ start-up, Odeo, which failed to gain traction. The ingenious idea of working on an ‘Internet SMS’ came from Jack Dorsey, and so, Twitter was officially born. Twitter started as a platform for status updates that incorporated a social function, but it quickly evolved into an information network. The platform received its first big popularity boost in early 2007 during the South by Southwest Interactive conference, a popular annual media event, where participants kept engaging each other using tweets.
On that day, Twitter experienced a surge of tweets from 20,000 per day to 40,000. By the end of that year, Twitter averaged 400,000 tweets per quarter. In 2008, this number jumped to over 100 million tweets per quarter; and by 2011, Twitter was recording over 140 million tweets per day. It quickly emerged that Twitter was not just any other social novelty, but a news source where short, quick and frequent messages were shared to a large audience across the world. It became a communication tool for businesses, governments, politicians, celebrities and literally, any other user. In the 2008 US general election, Democratic nominee and eventual presidential winner, Barrack Obama, dominated his rival, the Republican’s John McCain on the platform.
In 2016, Donald Trump made Twitter his somewhat official platform for campaign message dissemination and even during his presidency. It was established that Twitter activity surged during major events, such as popular sporting events, the deaths of prominent personalities or the launching of major movies or TV series. In Q1 of 2019, Twitter reported having more than 330 million active monthly users. Twitter was also ranked as the 10th most downloadable application of the decade (2010-2019). Twitter generates revenues through ads offered to corporate accounts, specific tweets or topics.
Twitter went public on November 7th, 2013, listing on the NYSE where it trades under the ticker symbol TWTR. It falls in the Communication Services sector, under the Internet Content & Information industry. Post its IPO, Twitter embarked on an acquisition spree in a bid to survive and thrive in the cut-throat environment of social media. The major deals completed by Twitter include the 2013 purchase of MoPub Advertising Solutions for $350 million; the 2016 acquisition of Magic Pony Technology for $150 million; and the 2015 buyout of TellApart for $480 million, the company’s biggest deal as of October 2020.
Twitter Stock History
The IPO price for Twitter was $26, and the company quickly jumped over 72% on its first day of trading to close at circa $45. Twitter has never implemented any stock split in its history. The initial pump for the stock was overextended, and this pushed Twitter to print its all-time high of circa $73 by December 2013. But the fairy tale ended there. By May 2013, the stock had tumbled to lows of circa $30, and a feeble recovery found resistance at below $55 in October 2013, paving the way for the downtrend to resume. By the end of 2015, Twitter had fallen below its IPO price, and by June 2016, the stock printed its all-time low at just below $14.
The downtrend was inspired by fundamental factors, such as the stagnation in user growth as well as leadership upheavals. The stock maintained a sideways trend until the end of 2017 when a weak uptrend was kick-started. The drift higher topped out at above $46 in June 2018, after which a sideways trend ensued. The stock found support in March 2020 at above $20 and pushed to highs of above $45 as investors considered Twitter as one of the companies set to benefit from restrictions imposed by governments as a result of the coronavirus pandemic. Up until October 2020, Twitter has never paid any dividends to shareholders since its IPO. This means that the stock has largely underperformed. Investors anticipate that non-dividend paying stocks will deliver profits in the form of exponential stock valuations, but this has not been the case for Twitter. It is still early days for the stock, and there is still room for Twitter investors to be rewarded for their patience.
How to Trade Twitter Stock
Twitter is one of the most-watched stocks on Wall Street. Here are a factors to consider when trading the Twitter stock:
- Legislative and Taxation Issues
Twitter faces legislative issues, such as restrictions in certain jurisdictions as well as tough laws that seek to ensure data safety and the eradication of fake or negative news. In regions such as Europe, Twitter may also be subject to proposals of new forms of digital taxation that may impact their overall profitability. - Competition and New Product Rollout
Twitter’s major challenge in the market has been as a result of its competition rolling out innovative products, such as disappearing content, customisable videos and the easy utilisation of various features. Companies, such as Facebook, Snapchat, TikTok and Instagram, have introduced features that make Twitter look outdated. This does not bode well for the future of the company and going forward, survival can only be guaranteed by introducing new hit features and products. - Negative PR
Twitter has always come under attack as a platform that supports fake news, Twitter bots, fake accounts, controversial political ads, as well as limited account security. Bad publicity is usually a turnoff for investors and can sometimes trigger lower prices. - Periodic Earnings
Twitter’s fiscal year runs from January to December, and the company releases periodic earnings reports that update investors on the health of the business. For Twitter, the most important metrics to watch out for include daily active users, ‘monetisable’ users, and revenues as well as profits. Positive numbers are good for the stock, whereas negative numbers inspire lower stock prices.
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- International Regulation
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Twitter Stock FAQ
- Why should I trade Twitter shares?
Twitter is a real-time microblogging and social media service that’s well known for the massive stock moves often seen following its earnings releases. Even if you aren’t interested in trading this stock on a regular basis, it can make very good sense to keep tabs on it leading up to the earnings releases as the stock can make very dramatic moves in either direction. Trading Twitter is also a good way to speculate on the state of the online advertising industry, since nearly all of Twitter’s earnings come from advertising services on the platform.
- Is Twitter the best social media stock for trading?
Social media stocks, like technology shares in general, tend to show quite a bit of volatility, especially around earnings releases. This makes the entire sector an excellent trading opportunity in general. At times Twitter will definitely be the best social media stock to trade, while at other times it will show more restrained price action. Because there will be times when Twitter is the best social media stock for active traders, they need to keep it on their radar all the time, since trading conditions can change rapidly.
- What’s the best strategy for trading Twitter shares?
If you look at a long-term chart of Twitter you will notice very abrupt reversals, very strong trends, and many rapid drops and ascents. In short, this is one volatile stock. That means patience is required to wait for the right entry, and quick action is required once the conditions are right. When Twitter shares are trending trades should only be taken in the direction of the trend. Keltner Channels can be useful during trends, with entries made as price pulls back to the centre of the channel.
