A “Real-Time” Social Media Breakout!

Facebook and Instagram are for updates on family and friends.

Snapchat is for teenagers.

But Twitter is all about business…

I keep Twitter up and running on my screen throughout the work day. It’s the best way to stay plugged into the markets in real-time. Major financial news flashes across Twitter minutes before it hits the television. That’s invaluable — even if you aren’t actively trading.

You can communicate with some of the wealthiest, most famous investors and read what’s on the minds of prominent financial journalists on Twitter. You can even “eavesdrop” on traders’ conversations as they talk about what stocks they’re looking to buy next.

Despite its usefulness, Twitter is social media’s red-headed stepchild.

For the past couple of years, we’ve watched the Twitter management team flop around aimlessly as they try to implement something resembling a turnaround plan. The problem is all of Twitter’s “improvements” are ruining the user experience.

First, Twitter decided to shuffle tweets around in your timeline, inserting older ones that have received “likes” from people you know. This messes up the chronological order of your timeline, one of the service’s most important features. I want to see what’s happening right now first!

Then Twitter started experimenting with longer tweets, giving some verified accounts the ability to write 280-word posts. Again, this is a change that seems to go against everything Twitter stands for. Users want to read quick takes, not blog posts!

Twitter’s inability to innovate and properly monetize its platform has scared most investors away from the stock. Management ineptitude has always been the primary concern of analysts and investors.

Think about it: The President of the United States essentially built his entire campaign on Twitter. And he still uses the platform to disseminate his agenda to his 41 million followers. If you can’t turn a profit with the most powerful politician in the world directing eyeballs at your website every single day, something has gone horribly wrong.

As a result, Twitter shares have been dead money walking for years.

Until now…

Twitter shares traded as high as $70 shortly after its 2013 IPO. It’s been a slow slog lower ever since.

But the stock looks like it’s finally putting in a bottom. Shares bounced off $14 not once but twice — first in 2016, then earlier this year.

Now we’re finally seeing some positive momentum thanks to a bang-up earnings report released yesterday.

Twitter smashed its third-quarter earnings estimates yesterday. The company also said it could become profitable for the first time by next quarter, thanks in part to curbing expenses and a new focus on selling data to other companies, Reuters reports.

In the past, Twitter has relied on advertising dollars and promoted tweets for revenue. But a renewed focus away from ads is finally a strategy that’s working in the company’s favor. After all, Twitter controls mountains of data on its millions of users. This information is insanely valuable to other companies looking to better target their ad dollars.

The surprise earnings beat sent Twitter shares soaring yesterday. Shares bolted higher by almost 19% on the day, erasing its summer losses and vaulting the stock back toward the top of its 2017 trading range.

Sure, Twitter still has a lot of work to do before it can become the flourishing social media giant we all wanted it to be back when it first went public five years ago. But what we saw from the company yesterday is a good start.

Sincerely,

Greg Guenthner
for The Daily Reckoning

The Daily Reckoning