fbpx

Twitter (TWTR)

Anyone who’s anyone these days has a twitter account, from musicians to sports stars to the Pope. The numbers speak for themselves. As of July 2020, Twitter had 330 million active users each month and 145 million users daily. 500 million tweets are sent each day – that’s 5,787 each second if you’re counting. Importantly, according to twitter, 80% of these are in the 18-25-year-old age group. The cashed-up and freewheeling millennial generation who are primed and ready to be sold new products to. It’s music to an online advertisers ears.

The pandemic shutdowns globally, as well as the social protests being experienced in the United States at the moment, have only increased these numbers. Yes, Twitter users are stuck at home with more time to catch up on the news and are spending more time in front of their screens. But the need for up to date information on such important issues means the public can’t just rely on traditional forms of new services for their knowledge fix. Twitter fills this need consummately.

Recent statistics from DMR showed that 92% of world leaders have a Twitter account. Donald Trump’s twitter account, for instance, is his main source of communicating with the American public. He has sent more than 50,000 tweets since he became President back in 2016. It has been a massive boost for Twitter brand recognition. He has a whopping 80.3 million followers at last count (irritatingly for him, still 30 million behind his predecessor Barrack Obama). Followers that either love him or hate him. It doesn’t matter to those selling advertising. All they want are the eyeballs on screen.

Social media has become the easiest (and fastest) way for politicians to engage with their constituents. And in times like these, it has become increasingly important for State and local governments, Health Services, the police, public transport and many other crucial services to disseminate information out to the public as quickly and efficiently as possible. If you want to find out about something that is happening in real-time you need to jump on Twitter.

The recent bushfires in Australia are a perfect example. Emergency services and fire departments use Twitter along with other social media apps to get information out to the public as quickly as possible. I know during catastrophic fire days I’m attached to my Twitter account waiting for updates or alerts from my local services. But did you know that these emergency services also monitor communication between Twitter users to map and respond to the bushfires themselves? Yes, it’s a great way to communicate important information to the public but its also a brilliant way to collate information from people on the ground and respond more effectively to an emergency.

Twitter pulled in $562 million in advertising in the last quarter. This was down 23% from the previous quarter. It has been a victim of advertisers pulling their business during an economic slowdown. The absence of professional sport during the first few months of the pandemic was a major hurdle, but this is slowly coming back on board. Advertising is responsible for approximately 85% of its total revenue so it’s going to be important for Twitter to regain this revenue as the economy improves.

Crucially for Twitter 86% of this revenue comes through its mobile app and mobile advertising is a booming business. Advertisers spent just shy of $58 billion in 2019, and this number was expected to grow to $76 billion by the end of 2020 before the global pandemic hit. That’s a lot of extra money that will be coming into Twitter’s coffers if it gets it right.

The opportunity for Twitter to increase its share of advertising is enormous. Currently, 80% of the services active users are based outside of the US, yet only 51% of advertising revenue comes from here. If they can manage to increase ad sales to match US numbers they can double their revenue right there. It’s a tremendous opportunity.

Their licensing business is also increasing on an annual basis. This is where companies looking for real-time actionable data buy information off of Twitter – either to repackage or use for their own advantages. Think advertising companies, public relations, or stock traders looking for instant information. It is a multibillion-dollar growing business and Twitter will be at the forefront.

Twitter is another one of those stocks that has tremendous potential for increasing users and revenue and yet trades well below its value. It has succeeded in increasing active users so far in 2020 and while the advertising revenue hasn’t followed accordingly it is only a matter of time before it plays catch up. As will the share price which only recently passed its February highs. It will be a solid stock to hold in your portfolio for the foreseeable future.

Disclaimer: Capital 19 Pty Ltd ABN 17 124 264 366 AFSL 441891 (‘Capital 19’) believes the information contained is reliable, however, no warranty is given as to its accuracy and persons relying on this information do so at their own risk. This communication is for general information only and was prepared for multiple distributions and does not take account of the specific investment objectives of individual recipients and it may not be appropriate in all circumstances. Persons relying on this information should do so considering their specific investment objectives and financial situations. Any person considering action based on this communication must seek individual advice relevant to their circumstances and investment objectives. Subject to any liability which cannot be excluded under the relevant laws. Any opinions or forecasts reflect the judgment and assumptions of Capital 19 and its representatives based on information at the date of publication and may later change without notice. Any projections contained in this presentation are estimates only and may not be realised in the future. The investment manager certifies that all the views expressed in this document accurately reflect their views about the companies and securities referred to in this document and that their remuneration is not directly or indirectly related to the views. Capital 19, its directors, representatives, employees or related parties may have an interest in any of the companies and securities in this document and may earn revenue from the sale or purchase of any financial product referred to in this document or any advice. Past performance is not a reliable indicator of future performance. Unauthorised use, copying, distribution, replication, posting, transmitting, publication, display, or reproduction in whole or in part of the information contained in this document is prohibited without obtaining prior written permission from Capital 19.
Tags: