The social media giant Twitter went public on November 7, 2013. As with any IPO, Twitter’s stock opened on the market at a set price and fluctuated wildly in the hours after it began trading on the New York Stock Exchange (NYSE). Some people made bank on the first day of trading; others lost money. Some companies soared; others plummeted after their first day of trading. If you’re wondering whether you should buy Twitter stock, consider these reasons why you should and shouldn’t invest in this social media site’s future…
Motivations
Before you buy any stock, it’s important to understand your motivations. For some, buying Twitter stock may be a way to cash in on the company’s recent success. Others may see it as a way to support a company they believe in. Some people may simply want to make money off the stock market. No matter your motivation, it’s important to do your research before investing.
If you’re interested in making money off of stocks, I recommend finding a more stable investment. As for supporting companies with the belief that their business will grow? Remember to think about how much risk you’re willing to take with your hard-earned money. before making any sort of decision, I recommend reading our blog post, Why are Tech Stocks Down for more knowledge about the recent economic environment.
Numbers
The social media company has been a publicly traded entity since 2013, and its stock has been on a roller coaster ride ever since. For potential investors, the question is whether Twitter is a wise investment.
On the one hand, Twitter’s user base continues to grow. The company reported 330 million monthly active users in the fourth quarter of 2017, which was up from 317 million in the previous quarter. That’s good news for advertisers, who are looking for ways to reach more consumers. On the other hand, Twitter’s business model isn’t as straightforward as some other social media sites like Facebook or LinkedIn.
Twitter sells ads through its self-serve platform that allow companies to promote their products to specific audiences such as sports fans or fashionistas. However, because there aren’t yet any detailed third-party analytics about how these ads perform against goals like increased brand awareness or direct sales leads, it can be difficult for advertisers to assess how effective they’ve been at meeting their objectives.
In addition, while Facebook and Google charge low rates per click or per impression, Twitter charges much higher rates based on the number of followers an account has. As a result, many small businesses find themselves priced out of advertising on Twitter while larger companies can afford it.
Conclusions
The social media company has a lot of potentials, but it isn’t without its risks.
If you’re thinking about buying Twitter stock, here are a few things you should consider. First, the company is still growing and is not yet profitable. Second, its user base is highly engaged but relatively small compared to other social media platforms.
Third, Twitter has been struggling to attract new users and keep them active on the site. Fourth, the company has had a number of high-profile executive departures in recent years. Fifth, Twitter’s share price is volatile and has fluctuated wildly over the past year. Sixth, the company faces stiff competition from rivals like Facebook and Snapchat.
All and all we shouldn’t forget the attempt at the acquisition of Twitter by Elon Musk, resulting in a lawsuit that might affect both sides.
My thoughts
Here are a few things to consider before making your decision.
If you’re looking for short-term gains, then I would stay away from stocks like Twitter because their high volatility could lead to big losses in a matter of minutes. Long-term investors may want to take a look at buying the Twitter stock now while it’s trading below $10 per share.
The reason? Facebook was trading at $26 per share when it went public in 2012 and today trades at around $123 per share (a 5x return).
Granted, this comparison isn’t apples-to-apples because Facebook already had an established user base but if history repeats itself then people who invest in the early stages will reap rewards as well as those who hold onto their shares for longer periods of time.
