Since launching online in 2006, Twitter (TWTR) has struggled to turn its undeniable technological and cultural currency into profits. But will the election of Donald Trump, who perhaps more than any politician has used the social media service to inscribe his views on public life, also help bring the Internet company commercial success?
Certainly, Twitter is likely to play a special role as a communications tool in the new presidential administration. In the last two days alone, his tweets have ranged from expressing support for the people of Tennessee as they battle wildfires to an angry denunciation of those who burn the American flag, complete with a call of dubious legality to jail them and revoke their U.S. citizenship. Trump also used Twitter to lambaste CNN for its coverage of him, arguing that he would have won the popular vote against rival Hillary Clinton were it not for “serious” fraud (without offering any evidence).
“I love Twitter.... it’s like owning your own newspaper --- without the losses,” he tweeted in 2012.
“So if you think about all the publicity that Trump gets from tweeting that flag burners should be put in jail or that there is massive voter fraud in California, it gets repeated … hundreds of thousands of times,” said Michael Pachter, an analyst with Wedbush Securities, who rates Twitter’s stock as “neutral.” “There has not been a huge upsurge in people who joined Twitter because of Trump’s tweets, but there has been a huge upsurge in people who are aware of Twitter.”
According to Twitter’s analytics, Trump has more than 16.2 million followers, up from 12.9 million after his election, an increase of more than 25 percent. He ranks 83 on Twitter’s top 100 user list. A spokesperson for Twitter didn’t respond to a request to comment for this story.
The site projects that the former reality TV star will have more than 47 million within a year. If that forecast proves accurate, Trump would be vaulted into the top 20, though he would still trail the current occupant of the White House, Barack Obama, who has 79.9 million followers, along with the top-ranked pop star Katy Perry, who has 94.3 million. It is unclear, however, how many of Trump’s new followers are new to Twitter as well.
Whether Trump will continue with his tweeting ways isn’t clear because his 145-character missives could roil markets and create international incidents. During his recent interview with “60 Minutes,” he pledged to be “very restrained” in his use of the site “if I use it at all.” Trump, though, credited his use of social media as one of the reasons for his victory over Hillary Clinton.
Twitter has about 317 million monthly active users, well under the more than 1 billion users that log onto Facebook (FB) during the same period. One reason for the disparity in users is that Facebook is far easier to use than Twitter, according to Pachter. The former reality show star, however, seems to have mastered the complexities of Twitter just fine.
“Every literate adult who reads the news has seen a Trump tweet if they had their eyes open in 2016,” Pachter said.
Twitter has had a tough year. It tried and failed to sell itself. In October, Twitter announced plans to cut 9 percent of its staff in a cost-cutting move. Earlier this month, Chief Operating Officer Adam Bain announced that he would leave Twitter, the latest in a series of changes in the executive suite. The company raised eyebrows last year when it named co-founder Jack Dorsey as CEO, even though he also runs another public company, payments processor Square (SQ).
For investors, the most salient fact is that Twitter still loses money. In its latest quarter, the company posted a net loss of $102.9 million, or 15 cents per share, on revenue of $616 million.
Although the site reported better-than-expected earnings in its latest quarter and added more monthly users than Wall Street analysts expected, concerns remain about its slowing revenue growth, which fell from more than 58 percent at the end of last year to a projected 4.5 percent in the current period.
And while Trump’s tweets become worldwide news the moment the real estate tycoon hits the send button, Twitter shares have slumped more than 21 percent this year, missing the rally in the stock market in the wake of his stunning victory in the presidential election.
Yet some analysts remain optimistic that Twitter’s recent initiatives, such as live video streaming of NFL games, will eventually pay off. Though Twitter has pledged to turn a profit in 2017, Wall Street doesn’t expect the company end up in the black until 2018 at the earliest. The average 52-week price target on Twitter’s stock is $18.03, roughly 7 percent higher than where it recently traded.
“While investors continue to debate Twitter’s stand-alone/strategic value ... we think [Twitter] remains a compelling risk/reward when measured against both current investment sentiment & ‘17 Street [estimates],” UBS analyst Eric Sheriden, who rates Twitter shares as a “buy,” said in a recent research note.