Twitter: Market Missing Business Shift

| About: Twitter, Inc. (TWTR)

Summary

Twitter dropped back to recent lows following disappoint over the buyout process.

The social-media giant continues making a shift towards live video mostly ignored by the market.

The valuation metrics become more attractive on each dip in the stock.

As Twitter (NYSE:TWTR) sunk 5% on Friday, the financial news outlets obsessed over the inability of the social-media giant to find a buyer. The market continues to miss the underlying shift in the business to focus on live video with a move towards broadcast quality shows while obsessed with the buyout scenario.

At a close of $16.88, the stock hit lows not seen since the release of the weak Q2 results prior to the buyout rumors. As the stock now has an enterprise value less than private Pinterest (Private:PINIT), the reason to own the stock continues to multiply.

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Livestreams Making Progress

Anybody using Twitter or Periscope notices that more and more professional quality shows are infiltrating the service. While Twitter launches more and more streams on the main site, plenty of new daily shows are showing up on Periscope. The shows now typically read some type of advertisement, but clearly the future is for Periscope to run an ad as people pull up the show.

While this is going on, Twitter continues to increase the audience with the NFL games. The average audience peaked with the Patriot game, but the combination of total viewers and average audience is growing based on the quality of the game.

  • Week 2, Game 1 - 2.4 million total viewers, 243,000 average audience
  • Week 3, Game 2 - 2.6 million, 327,000
  • Week 5, Game 3 - 3.1 million, 236,000
  • Week 6, Game 4 - 3.1 million, 300,000

Other new shows include the The Jenna Wolfe Show hosted by a former correspondent on the Today Show and a sports show hosted by Kayce Smith.

A recent Jenna Wolfe scope highlighted by Periscope attracted 120,000 viewers. The Kayce Smith Show only attracts a few thousand viewers on Periscope so far, but the opportunity exists to eventually attract a much larger audience than previously possible for a young female in the sports talk business. She currently streams a sportsradio talk show from SB Nation Radio, but the opportunity exists to expand the show far beyond a radio focused broadcast.

Periscope Producer

For those questioning the innovation since Jack Dorsey became the CEO of Twitter, one needs to step back and look at all of the innovations around live video. The latest installment being Periscope Producer that allows broadcasting live shows on Periscope via external cameras and software.

A prime example of the new technology was the CBS 12 feed on Hurricane Matthew that was fed to Periscope. The video got over 700,000 views as users could watch the broadcast on their smartphones even without power. Or people outside of the broadcast area in Florida could watch local updates on the massive storm.

Other shows from ABC's Dancing with the Stars, Louis Vuitton, and The Ringer attracted viewers north of 150,000 for high quality broadcasts without much in the way of advertisement.

The key is that Periscope is moving away from random, low quality videos shot via smartphones to high quality, production broadcast shows delivered to consumers on a consistent basis. The focus is now shifted to consumption on the go via a smartphone and away from broadcasting from the smartphone. Either option still exists, but users are clearly flocking to the better quality content.

Now anybody like Jenna Wolfe or Kayce Smith can launch a high quality show with immediate distribution around the globe without needing a large budget or a cable TV network. At the same time, Periscope can support the mom broadcasting a kids basketball game to provide diverse content and attract users.

The money though will come from the high quality content that attracts thousands of real-time viewers.

Takeaway

The key investor takeaway is to not panic on the stock while the market misses the large audiences watching broadcasts on either Twitter or Periscope. As my previous articles highlighted, Twitter is now even more attractive compared to the valuation of LinkedIn (NYSE:LNKD).

The dip last week even places Twitter below the $11 billion valuation of private Pinterest that only last week reached 150 million users with revenues a fraction of those of Twitter at only $300 million this year. While investors expect weak Q3 numbers, Twitter should have something positive in store for shareholders as video ads from top brands surely reinvigorate growth compared to the ad dollars for promoted tweets and other various ads that grew revenues to the $2.5 billion level.

Disclosure: I am/we are long TWTR.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.