Social networking platform Twitter, Inc. (TWTR) has gained 24.7% so far this year, to close yesterday’s trading session at $67.52. The stock rallied to a record high after the company announced three major long-term goals on February 25. The company aims to at least double its annual revenue by 2023 and to attain 315 million monetizable daily active users over the same period. Moreover, TWTR plans to double its development velocity by the end of 2023.

Nevertheless,  the stock has declined 16.4% since hitting its all-time high of $80.75. Company CEO Jack Dorsey was sued by a shareholder in February over his dual role as CEO of TWTR and Square, Inc. ‘s (SQ). TWTR also received a warning from Indian government in February regarding a dispute about the country’s content regulation.

So, TWTR’s near-term prospects look uncertain. The controversies swirling around it, along with its efforts to develop new features to boost its income, may not sit well with users and investors.

Here’s what we think could shape TWTR’s performance in the coming months:

Impressive Recent Financials

TWTR’s top-line has surged 28% year-over-year to $1.29 billion for the fourth quarter, ended December 31., This reflects  better-than-expected performance across all major products and geographies. Its average monetizable daily active usage (mDAU) increased 26.3% year-over-year to 192 million, driven by global conversations around current events and ongoing product improvements. Its net income was  $222.12 million for the quarter, up 87% year-over-year, and its non-GAAP EPS came in at $0.38, up 52% year-over-year.

‘Super Follows’ Feature Not Well Received

In its annual analyst day on February 25, TWTR announced a new feature called ‘Super Follows’, which will allow users to charge followers and give them access to extra content. However, this appears to have  not been well received by  the majority of the users. The hashtag #RIPTwitter began spreading on the social media site following the company’s announcement.

Banning of Several Accounts on TWTR’s Platform

TWTR permanently closed former U.S. President Donald Trump’s account  in January.  The account, which had  more than 88 million followers, was closed “due to the risk of further incitement of violence.” The company also suspended the account of U.S. conservative activist group Project Veritas in  February for repeated violations of its  information privacy policy.

TWTR  took down 373 accounts in  February, which it alleged  had ties to Russia, Armenia and Iran and had breached its platform manipulation policies. While the reasons for suspending the accounts might be justified, the decisions led to TWTR’s loss of users to other social media platforms.

Consensus Price Target Indicates Downside

Wall Street analysts expect the stock to hit $45.85 in the near term, which represents  a potential decline of 36.3%.

POWR Ratings Don’t Indicate Enough Upside

TWTR has an overall rating of C, which equates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. TWTR has a C grade for Quality also. This is justified given that its trailing-12-month gross profit margin of 63.2% is higher than the industry average 51%. But it has negative values for trailing-12-month return on common equity and trailing-12-month return on total assets. The stock has a C grade for  Stability too.

We have also graded TWTR for Growth, value, Momentum and Sentiment. Get all TWTR’s ratings here.

TWTR is ranked #30 of 68 stocks in the D-rated Internet industry.

Better than TWTR: Click here to access 10 top-rated stocks in the same industry.

Bottom Line

TWTR’s CEO Jack Dorsey has been in the news lately because he announced that he will be selling his first tweet as a non-fungible token (NFT), which is like a digital souvenir. The bid for it has already reached $2.5 million.

Despite the company having y reported impressive results for its fourth quarter, it has been facing several controversies. TWTR is also facing intense competition from other social media companies. Consequently,  we think it  wise to wait and see how the new features announced by the company work out with  users before betting on the stock.

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TWTR shares were trading at $66.52 per share on Wednesday morning, down $1.00 (-1.48%). Year-to-date, TWTR has gained 22.84%, versus a 3.93% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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