December turned out to be a pretty good month for Twitter, despite its earlier plunge in share price. The analyst firm Argus decided on 22nd December that it was a good time to buy Twitter shares, even though their price had fallen to not far off the lowest point in the company’s dramatic 52-week share range ($29.21 to $74.73). Argus set the target price at a relatively healthy $44.
The reasoning appears to have been that Twitter has some key competitive differentiators setting it apart from other social media. Not least amongst these is its celebrity appeal: stars have taken to the platform as to no other, making Twitter the principal channel for a global conversation between them and their burgeoning communities of followers.
Argus also believed that Twitter has a far greater potential to grow its user base (and advertiser potential) than, say, Facebook, which it sees as a totally different social media company. Twitter’s revenues were up 113 per cent year-on-year in Q3 2014, hitting $361 million. Even a few characters of celebrity crafted-content, it seems, can generate millions of followers and oodles of advertising dollars: for the full year of 2014, Argus confidently anticipated earnings of $0.10 per share and a 105 per cent growth in revenues to hit the $1.37 billion mark.
And it’s set to get better: in 2015, Argus anticipates earnings of $0.34 per share and a staggering $2.29 billion in revenues, made up of data licensing (16 per cent) and advertising (84 per cent).
Argus’ positive ‘buy’ rating paid off handsomely, with Twitter share prices spiking by more than 4 per cent on 22nd December, closing the day’s trading at a respectable 3.67 per cent up ($38.44 per share).
But it wasn’t all down to Argus. Another internet analyst, SunTrust’s Bob Peck (whose company maintains a buy rating on Twitter shares) let it be known during an interview on CNBC that dramatic changes may be in the Twitter pipeline. Specifically, he more than hinted that Twitter’s CEO, Dick Costolo, would probably not be in that job by the close of 2015.
Costolo’s prospective departure appears to have strengthened confidence in Twitter’s fortunes. During his tenure, he presided over a strong financial performance, but underwhelming user growth.
There’s not much room for sentimentality, it would seem, when it comes to internet business.
