Twitter's Up For Third Week In A Row: What's Next For The Stock?

While much of the media is captivated about the upcoming trial between Twitter NYSE: TWTR and Elon Musk, investors may have noticed the stock didn’t get much of a nudge - in either direction - following its second-quarter report this month. 

So what’s next for the little blue bird? 

To answer that, let’s take a look at the social-media industry landscape right now. 

With fellow social media firms like Snapchat NYSE: SNAP and Meta Platforms NASDAQ: META trending lower, Twitter is a bright spot among its industry peers.

Twitter shares are up 3.47% for the past week and 5.41% in the past month. In contrast, here are the performance numbers for Snapchat:

• Past week: -40.86%
• Past month: -29.57%

Meanwhile, here are the returns for Meta:

• Past week: -12.26%
• Past month: +0.02%

While Snapchat and Meta fell on advertising weakness and disappointing guidance, Twitter rebounded quickly, even after missing analysts’ views on the top and bottom lines.

So why the recent upside trade in Twitter? 

There’s not much to suggest anything is turning around for the company’s core business. 

Paying More For Premium 

One recent announcement concerned the company’s Twitter Blue, a monthly subscription service with some vague “premium features.”  If, for some reason you want the premium level of Twitter, you’re now going to pay $4.99, a 67% increase from the previous price of $2.99.

A price tag of $4.99 may not sound like much, but as squeezed consumers cut back on more substantive items like food and fuel, will they be willing to pony up an additional $2 per month for so-called benefits like undoing Tweets (which can already be deleted), custom app icons, bookmarking folders or seeing special themes?  

It may not be exactly the same thing, but social media companies are already getting pushback when they make unpopular changes. For example, Meta-owned Instagram rolled back some proposed changes after power users Kylie Jenner and Kim Kardashian slammed new features that seemed to make the app more like Tik Tok.

However, analysts’ consensus rating on Twitter is “hold,” with a price target of $43.01, representing a 3.40% upside. That’s not much, and is a gain that could reasonably be attained within days - or even in one blowout session. So analysts seem to have very limited expectations for the stock, although their downside projections also appear to be muted. 

However, in the past month, more analysts lowered than boosted their targets. 

Marketbeat analyst ratings show that only seven out of 32 analysts following Twitter consider the stock a “buy,” with two ranking it a “sell.” 

That’s a pretty solid degree of confidence from institutions, which partially explains the stock’s recent advance.

Perhaps Twitter - and to a lesser degree Meta - is benefiting from optimism after earnings reports from Microsoft NASDAQ: MSFT and Amazon NASDAQ: AMZN, which got a lift after showing that their cloud businesses have the potential to carry their businesses through an economic downturn with minimal damage. Similarly, Alphabet NASDAQ: GOOGL also reported strong search ad revenue in certain categories. 

Twitter Goes To Court

Of course, the big unknown for Twitter is the upcoming court date in Delaware, as it seeks to move forward with Elon Musk’s since-retracted bid to acquire the company for $44 billion. The company scheduled a shareholder vote for September 13, and the trial date has been set for October 17.

If Musk is ultimately required to purchase the company - and it’s anybody’s guess as to whether he would actually fully comply with a court order - that would be a boon for shareholders. Check out the chart of any company that’s being acquired for a set price per share: The stock bolts higher and then meanders sideways, without much movement. That’s because there’s no point in buying shares, as there’s no additional upside. Existing shareholders aren’t selling, as they want the big payout. 

All of this may add up to some cautious optimism about Twitter. It’s outperforming the S&P 500 by a wide margin, but the current market conditions still require some prudence before backing up the truck and loading up on shares of pretty much any stock.