Market view: Twitter approaches one year on the NYSE
The next two weeks are pretty pivotal for Twitter.
It shares its Q3 earnings on October 27, shortly before celebrating one full year on the stock market on November 7. Its share price ended day one at $44, giving the company a value of $24.48 billion dollars and raising a healthy $2.09 billion for the company.
All in all, it was a solid debut. The estimated launch price for the company was just $11.25 billion (though IG’s grey market, which allows traders to speculate on an IPO’s value, had long been stuck around the $44 mark), so Twitter managed to avoid the mistakes made by Facebook and enter the markets on a positive note.
Facebook’s influence
In fact, following Facebook could be seen to have made a major impact on Twitter over the past year.
Firstly, it helped its IPO in a few ways. When Facebook listed in 2012 it saw the huge demand for its shares and hiked prices, which led to a sell off: a mistake that Twitter wisely avoided. Facebook was also damaged by a delay caused by faults with NASDAQ technology, which is in part why Twitter listed instead on the New York Stock Exchange (NYSE). Finally, many traders who slept on Facebook’s listing – which after a shaky start is now soaring – saw Twitter’s IPO as a chance to make up for a missed opportunity.
It also probably contributed to Twitter’s initial momentum on the market. Twitter saw some strong initial growth in 2013, peaking on Boxing Day at $73; over 60% higher than its initial value.
Earnings have been mixed
Twitter’s stock stayed in the $60-$70 range for a while, or at least until its first earnings report (released on February 5) proved underwhelming. Revenue beat expectations, but user growth was markedly slowing and the markets – always wary of social media’s ability to vanish – reacted accordingly. Twitter stock dropped 25% to around $50.
A few months later, Twitter tested the $30 mark off of the back of another poorly received earnings call which revealed, once again, that user growth was stalling. Just as before, revenue was strong and the company’s advertising platform appeared to be working well, but investors couldn’t see beyond the faltering user stats.
Everything considered, it was a rough first half of the year. But good news soon followed; the platform had a stellar month during the World Cup, and prominent broker Nomura highlighted several reasons why the company was not actually performing as badly as detractors may have felt.
The stage was set, and Twitter’s last earnings call stunned traders. Revenue smashed expectations, in particular from mobile and international sources. Average monthly users also came in higher than the anticipated figure, and Twitter showed a clear ability to better monetize its users. Finally, predicted figures for the next quarter were raised considerably: the company clearly believed it could do more.
What next?
Twitter’s value climbed back to $50, the level it had dropped to after that initial earnings disaster, and the level it is at heading to its one year anniversary. Another positive call will see the company looking back on a strong first year; a repeat of the previous three and it could be facing negative growth.
A pivotal period indeed. Twitter has a balancing act on its hands: it needs to continue attracting new users and maintaining engagement whilst also monetising those users with a strong, effective ad platform. The ubiquity of Facebook ads has recently led to criticism of the company, even if it has pleased investors.
Following Facebook’s lead might not work for Twitter in this instance, then. Over the past 12 months the site has shown an ability to survive and possibly thrive on the markets. The next fortnight will reveal a lot more about whether it can continue to do so.
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