While much of the media is captivated by the upcoming trial between Twitter (NYSE: TWTR ) and Elon Musk, investors may have noticed that the stock didn’t get much of a boost, either way, following its report of the second quarter of this month.
So what’s next for the little blue bird?
To answer that, let’s take a look at the landscape of the social media industry right now.
With social media companies like Snapchat (NYSE: SNAP ) and Meta Platforms (NASDAQ: META ) trending lower, Twitter is a bright spot among its industry peers.
Shares of Twitter are up 3.47% in the past week and 5.41% in the past month. Instead, here are Snapchat’s performance numbers:
- Last week: -40.86%
- Last month: -29.57%
In the meantime, here are Meta’s returns:
- Last week: -12.26%
- Last month: +0.02%
While Snapchat and Meta fell on advertising weakness and disappointing guidance, Twitter bounced back quickly, even after missing analyst views on the top and bottom lines.
So why is the recent trade up on Twitter?
There isn’t much to suggest that anything is changing for the company’s core business.
Paying more for Premium
A recent announcement refers to the company’s Twitter Blue, a monthly subscription service with some vague “premium features.” If for some reason you want Twitter’s premium tier, you’ll now pay $4.99, a 67% increase from the previous price of $2.99.
A price of $4.99 might not sound like much, but as wiped consumers cut back on bigger items like food and fuel, they’ll be willing to fork over an extra $2 a month for so-called perks like untweeting (which can already do?be deleted), custom app icons, bookmarks folders or view special themes?
It might not be exactly the same, but social media companies are already getting pushback when they make unpopular changes. For example, Meta-owned Instagram reversed some proposed changes after power users Kylie Jenner and Kim Kardashian criticized new features that appeared to make the app more like Tik Tok.
However, analysts at Twitter have a consensus rating of “hold” with a price target of $43.01, representing a 3.40% upside. That’s not much, and it’s a gain that could reasonably be achieved in a matter of days, or even in one blast session. So analysts seem to have very limited expectations for the stock, although their downside projections also seem muted.
However, last month more analysts cut their targets than raised them.
Marketbeat’s analyst ratings show that only seven of the 32 analysts who follow Twitter rate the stock a “buy,” with two rating it a “sell.”
That’s a pretty solid degree of confidence from institutions, which partially explains the recent rally in stocks.
Perhaps Twitter, and to a lesser extent Meta, is benefiting from optimism after earnings reports from Microsoft (NASDAQ: MSFT ) and Amazon (NASDAQ: AMZN ), both of which got a boost after showing that their businesses in cloud have the potential to take your business. an economic downturn with minimal damage. Similarly, Alphabet (NASDAQ: GOOGL ) also posted strong search ad revenue in certain categories.
Twitter goes to court
Of course, Twitter’s big unknown is the next court date in Delaware as it looks to move forward with Elon Musk’s retracted bid to acquire the company for $44 billion. The company scheduled the shareholder vote for September 13, and the trial date has been set for October 17.
If Musk ultimately has to buy the company, and whether he would actually fully comply with a court order is anyone’s guess, that would be a big boon for shareholders. Look at the chart of any company that is acquired for a fixed price per share: the stock moves higher and then meanders sideways, without much movement. This is because there is no point in buying shares as there is no additional benefit. Existing shareholders are not selling as they want the big payout.
All of this may amount to cautious optimism about Twitter. It’s outperforming the S&P 500 by a wide margin, but current market conditions still call for some caution before backing up the truck and loading up on stocks of almost any value.
Twitter is part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.