Növekedési részvény: Twitter (Angol hír)

Elon Musk acquires 9.2% of Twitter (TWTR.US). The company has long struggled and competed with Meta Platforms (FB.US) for increased online ad revenue, in part because company executives don't actually use Twitter. There is a possibility that Musk will continue to buy more shares albeit at a higher price.

The most important news of the day, with the permission of the evolution of the war, was that Elon Musk acquired 9.2% of the social network. The news that Musk apparently wants to try to improve Twitter is an encouraging move considering fears of the debut of the competing platform Truth Social (DWAC) being built by former US President Donald Trump.

Executive use issue

Just a week ago, Musk conducted a Twitter poll with 2 million votes questioning whether the platform adhered to the principles of free speech. More than 70% of the votes criticized the social network with a resounding no.

source: Twitter

Even so, we must remember that Twitter is a listed company and therefore public, so the company is not required to comply with this requirement. However, the shareholders have shown that they want a platform that appeals to all users, whether they are Republicans or Democrats.

Musk will now control the largest block of shares in the company, more than even founder and former CEO Jack Dorsey, as well as the Vanguard Group with 8.39% as of Friday's close. New CEO Parag Agrawal finds himself in a strange situation as Elon Musk is the largest shareholder even above Jack Dorsey in multiple ways.

Musk actually has a lot more Twitter followers than Jack Dorsey. Although the latter is an influential person in the world, founder of Twitter and Block (SQ) along with his work on bitcoin, Musk is much more active and influential on the platform being one of the top 10 personalities with the most of 80 million followers.

According to Social Blade (https://socialblade.com/), Jack Dorsey (@jack) is ranked 887th on Twitter with the most followers, and the username has a lower engagement rank of 23,936. In fact, Jack Dorsey barely cracks the top 1 million actual tweets.

Source: Social Blade

If we compare it with the account of Elon Musk (@elonmusk), the differences are abysmal:

Source: Social Blade

The CEO of Tesla and SpaceX is in the world top 10 and his name has a participation rank of the top 100. One fact, only in the last 30 days, 3.7 million people have started following Musk, this figure is more than half of all the followers Dorsey has on his account.

From this perspective, it can be considered that Elon Musk is (or will be) more representative for the company than its own founder.

The company has a long history of hiring executives without much experience on the platform. Even the recently elected president and now co-CEO of Salesforce (CRM.US) only has 106,000 followers. He is not what one would consider a power user of the social media platform despite being a very influential businessman today.

Parag has no job security and will surely not keep his job if Elon Musk decided to sell these shares and create a competitive platform. Ironically, the new CEO hasn't tweeted since March 16, while the previous tweet dates back to March 3. As with Jack before, the executives don't even seem to support the social network they themselves run through regular use. Something that Elon Musk could do practically without any difficulty.

Lack of income

Shares were up 25% on the news and 27.13% at the close of the session, likely with investors expecting Musk, in combination with a venture capital fund, to make an IPO for the entire company. Twitter has only recovered $50, while shares traded above $70 last summer.
By valuation, the stock only trades at a multiple of 5 times sales (EV/S), but interestingly, the multiple is now in line with Meta Platforms (FB.US) and Pinterest (PINS.US).

source: Ychart

The important issue now is not the stock multiple. The problem is Twitter's limited revenue base compared to Meta Platforms (FB), for example. Twitter has done a horrible job of growing the revenue base despite having the most influential social network in the world along with Meta. Over the past decade, the old Facebook has grown bottom line revenue to more than 23 times the size of Twitter.

source: Ychart

One might even wonder what the connection is between executives' lack of use of Twitter and minimal revenue growth over the years. After all, executives seem less interested in using the platform and more interested in keeping former President Donald Trump (a heavy user in the past) off Twitter.

Analysts estimate that Twitter's revenue will grow about 20% over the next two years to reach $7.3 billion in 2023. The company has already forecast revenue to reach $7.5 billion.

The community of analysts seems to have great doubts about whether the social network will grow at rates slightly faster than those of Meta, much larger than those aiming to grow at rates of 12% and 17%, respectively. Notably, Meta is forecast to grow revenue this year by multiplying Twitter's overall size, leaving little excuse for the social network not to outpace revenue growth for the much larger Meta.

Technical analysis

The price of Twitter (TWTR.US) ended up rising more than 27% at the end of the session. Investors are expecting continued bullishness after the recent break of the shorter-term downtrend, tipped off in advance by the bullish RSI divergence. Now, investors are looking for the next benchmark at $58.5. Reference between the lower highs and the support of September 2021.

source: xStation

Darío García, EFA
XTB España