What's wrong with Twitter and is it a buy?

Pop up the the stock charts of AMZN, FB, GOOG, and SNAP and see what they all have in common. What do you notice? All are trading at or near all time highs. They have all reported solid results, led by ad growth and consumer spending driven by traffic through their sites/apps.

Now check out the TWTR graph. After Friday's 15% decline it is now off by 1/3 since reaching 52 week highs earlier this year. What has gone wrong? Here is a partial list, in no particular order:

• part time CEO giving TWTR his part time focus (and yes, I am a buyer of SQ here);
• less than expected earnings and very conservative guidance - it's not an exaggeration to say that the removal of a certain political leader whose initials are DJT probably had a significant impact here;
• being stuck between a rock and a hard place. FB and TWTR are the undisputed leaders of the "you're an idiot" type discussions, but TWTR sits at a distant second place. LinkedIn and other sites are much more cordial exchanges and dominate the professional circuit. TikTok and Instagram are the undisputed leaders of the cute video space and although some use TWTR to reach that type of audience, they are again a distant third;

Can they turn things around? Sure. But it will probably require a major rethink of the business model rather than trying to do better at what they have been doing for years. I am a big tennis fan and it has been a treat to watch Federer, Nadal and Djoker tinker with, and overhaul, various aspects of their games over the past decade plus. This has enabled them to remain entrenched at the top of the game and push back the finest assaults brought on by numerous generations of up and comers (here's looking at you Dimitrov, Raonic, Nishikori, Zverev, Tsitsipas, etc...). TWTR will need to do the same. 

Three ideas to achieve better performance would be to: 

1. start producing their own content
2. provide a second version of Twitter that would be a paid/subscription model and 
3. they could leverage the management linkage with SQ to offer payments (with a possible gateway into crypto as well). 

The first idea has helped Netflix become a juggernaut in its playground. The second idea is what has helped Spotify become an indispensable choice for those that want to listen to certain podcasts/music. The final one has obviously helped PYPL and SQ wage a war on cash, which they are winning. Will any of these things happen? Who knows. But it should. And if does, it would mean that TWTR would be a good buy here. Stay tuned folks.