Twitter’s [TWTR] share price has gained 40.03% year to date to close at $45.23 on 24 November, but its rise hasn’t been without hiccups. The first major downturn came in March, as Twitter’s share price plummeted 40.22% in a week to $20.00 on 18 March. A steady climb to a 52-week high of $52.93 on 29 October was then abruptly curtailed following its Q3 results announcement, as disappointing user growth sent the social media giant spiralling 26.45% to $38.93 on 2 November.
Since then, Twitter’s share price has made a tentative recovery, gaining circa 3.5%. Will this continue or is there further downside to come?
Twitter CEO Dorsey gets latest Senate grilling
CEO Jack Dorsey was grilled by the Senate Judiciary Committee alongside Facebook [FB] CEO Mark Zuckerberg last week. The Committee was called over concerns regarding content moderation policies, specifically focused on the US election. Dorsey was questioned over labels added to false and misleading election-related tweets, which Republicans said were biased against conservatives, while Democrats claimed Twitter had not gone far enough to control misinformation. Democrat senator Patrick Leahy remarked: “I think you can and must do better.”
"I think you can and must do better" - Patrick Leahy, Democrat Senator
The New York Times reported that Democratic lawmakers called for tech sector legislation, including tougher data privacy laws, changes to a law that gives the companies legal protection for content posted by users, and greater antitrust action. Republicans have also called for reforms to the legal shield protecting platforms for third-party speech. Dorsey agreed content moderation reform is needed, but said his focus was on giving users more tools to control the content they see through algorithms.
Dorsey has now testified twice in the space of just two months. Such attention is unlikely to help the social media giant in the short term, but a positive outcome could see Twitter’s share price rise. If a conclusion that placates all sides — including US regulators — is reached, it could finally release the shackles on Twitter’s share price.
New features fail to raise Twitter’s share price profile
The social media firm launched a new feature called Fleets last week, which lets users post messages, photos, and videos that disappear after 24 hours. With similarities to Instagram and Snapchat stories, Twitter acknowledged that the format “may sound familiar”.
“We’ve learned that some people feel more comfortable joining conversations on Twitter with this ephemeral format, so what they’re saying lives just for a moment in time,” the company said.
Twitter also teased another new feature called Spaces, which would enable audio chats on the app. “We’re always exploring different ways to serve the public conversation on Twitter. Audio is another way for people to share what’s on their minds with their own voice and we see this opening doors to a more collaborative experience.” Twitter told Barron’s.
"We’re always exploring different ways to serve the public conversation on Twitter. Audio is another way for people to share what’s on their minds with their own voice and we see this opening doors to a more collaborative experience" - Twitter told Barron's
Though Twitter’s share price only gained 0.3% to $42.85 on the day, it did comfortably outperform the wider benchmark S&P 500 index, which fell 0.48%.
Where next for Twitter’s share price?
Twitter’s share price has an average 12-month price target price of $45.85 among the analysts tracking the stock, with a high target at $65.00 and a low target of $19.00, according to the Wall Street Journal. Hitting the average target would only represent a 2.62% upside on the current share price of $44.68.
Of the 38 analysts offering recommendations on Twitter’s share price potential with the WSJ, 10 rate it a Buy, with 24 Hold and four Sell ratings, giving a consensus estimate of Hold. With analysts reckoning on minimal upside and as the threat of greater regulation hangs over the tech sector, Twitter is likely to remain a Hold for the time being.
|Operating margin (TTM)||-2.11%|
|Quarterly revenue growth (YoY)||13.70%|
Twitter's share price vitals, Yahoo Finance, 25 November 2020