The case for Twitter

Of all the stocks in my portfolio, I’d give Twitter the best chance to double first. My belief is that Twitter is under valued for 2

  1. Investors almost completely discount the brand value that the company is gaining and is sure not to loose. From President Trump to the Dalai Lam, Twitter is the de-facto way for any person or personality on earth to say things, uncensored and in their own voices. Talk about a defensible moat!
    I don’t think revenue growth or user numbers are the right focus when looking at this company as one can’t calculate when this gift of branding will bare fruit. This is why I think you should own Twitter only if you plan to stay in for the next 5 years.
  2. Too many investors refer to, and think of Twitter as a social platform. It’s not. Twitter is a real time news service curated by editors you elect by following them and inviting them to set your reading agenda for the day. This is a practically new category, and news media companies are feeling it. Today, Twitter is setting the agenda – tomorrow it’s selling the ads.
  3. Twitter is profitable and cashflow positive so I don’t expect any hurried funding requirements by raising debt or diluting equity.

Jack_Dorsey_2014

I love founder led companies. There were some worries as well as (unfair) pressure on Jack Dorsey to make things right after a stretch of less than stellar CEO’s for the company. But Jack is back and doing a great job with clear goals for the product road map and a great boost to company culture. And even though Jack splits his time between Twitter and Square (SQ), he seems to be pulling off the balancing act impressively.

Looking at the new media landscape, the only real threat to Twitter could come from Facebook (FB), but it’s hard to see Facebook providing real competition – Facebook is about your friends and because the Facebook newsfeed is ridden with content overload, posts from celebrities or pages you follow hardly ever show up in your feed.
Facebook uses engagement metrics to determine what goes into your feed while Twitter is holding on to it’s intuitive “first come first serve” feed principle. Besides, it seems like Facebook is not looking to take on this form of real time curated news leaving the field open for Twitter to establish it’s service.


800px-Donald_Trump_official_portraitThis post can’t end without mentioning president Donald Trump, Twitters most active user who has elevated the brand name to new heights and will likely drive the free advertising for 3-7 years more.