Shares of the embattled social media stock, Twitter (NASDAQ: TWTR), has been hit hard once again. The company posted earnings recently; sales were weaker than expected. However, the news was better than expected — despite the fact that the company still lost money in the quarter. Here’s why.
Total monthly active users are up to more than 310 million, after Twitter added 3 million last quarter —although Wall Street expected just 2 million addition. But, besides just the new subscribers, there is greater potential.
I called out Twitter when it inked the NFL deal a few months ago. Twitter shares are up over 10% since then as Twitter appeared to finally be figuring out how to blend live content with social. Back in February, I noted that, “More deals like the NFL contract would mean more users, market share and time spent on the platform.”
Well, we’re seeing more deals as Twitter has gotten more aggressive when it comes to finding partnership opportunities in streaming. Whether you realize it or not, Twitter now has partnerships with most of the major professional sports. That means Twitter could now be poised to bring in more advertising revenue from conventional players that have previously shunned social. It started with Twitter’s NFL deal that gives Twitter the rights to stream 10 Thursday night NFL games for the 2016 season.
Twitter’s NBA Deal: Just the Latest
Twitter’s NBA deal is Twitter’s latest professional sports deal. Twitter will live stream a new NBA pregame show — to be shown exclusively on Twitter. As well, there will be another show announced later.
The Twitter NBA deal is exciting. The NBA, unlike some of the other major sports leagues, has embraced social media — and is actually good at it. Twitter is quickly becoming ESPN for the digital world.
ESPN has been slow to embrace the cord-cutting trend and online-only shift (which refer to the trend of consumers canceling their cable service), leaving the door open for a company like Twitter. Twitter’s foray into sports has been swift, catching not just ESPN off guard, but Wall Street as well. Much of the investing community could now be overlooking the potential at Twitter.
NFL, Pac-12, Wimbledon
Twitter now has deals with the NBA, NFL, Pac-12 college football and Wimbledon tennis. The Wimbledon tennis tournament earlier this month was the social media company’s first debut into live streaming.
Twitter could soon become the go-to spot for live sports and media. In addition to Twitter’s NBA deal, it has snagged streaming deals with CBS News and Bloomberg Media. It’s also rolling out a new nightly show called The Rally, which could really cement Twitter’s quest to become the digital ESPN. The Rally will be a sports show with commentary and highlights.
Twitter Is Becoming More Valuable
Trading at 5.5 times sales, Twitter is now cheaper than its major social media peers: Google (NASDAQ: GOOG) trades at 6.5 times sales, Facebook (NASDAQ: FB) at over 17 times and LinkedIn (NASDAQ: LNKD) is at 8 times sales. Heck, even Yahoo (NASDAQ: YHOO) trades at 7.4 times sales. The Twitter balance sheet is strong and it has a sizable cash position with over $5 per share in cash.
Twitter is no stranger to buyout rumors; however, its push to get users more engaged with its platform could finally give a company like Apple (NASDAQ: AAPL) or Google a reason to finally but it. My colleague Larry Meyers has talked about Twitter as a buyout target in the past, given its solid platform. The big overhang, however, is that we don’t know when or who a buyer might emerge.
In the meantime, Twitter’s ESPN deal is a big positive when it comes to attracting new users. This new user base is a bit more sticky — meaning these users keep coming back and stay for longer. Twitter is also gaining traction with, including Promoted Tweets with video and autoplay video.
All the partnerships could be the start of something big for Twitter. It’s consistently struggled with both growing users and keeping them engaged with the platform. Streaming deals with professional sports leagues will give users a reason to come to the platform and stay awhile. More users means more advertisers, so all in all, it’s an exciting time to be a Twitter shareholder.
Disclosure: The author is long Twitter at the time of writing.
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