It’s hard to look anywhere without seeing Twitter (NYSE:TWTR) in the news. We’ve encountered a new feature, we’ve heard President Donald Trump’s wrath and now we’ve read an earnings report that sent Twitter stock tumbling.

Fortunately for investors, however, Twitter seems to be on the rebound. And the likelihood that Trump’s bullying will hurt the company long-term is diminishing by the day.

Right now, Twitter gets a “B” grade and a buy recommendation in my Portfolio Grader. As the White House gets ready to welcome a new occupant in 2021, let’s take a closer look at TWTR and see how it’s set to enter the new year.

Twitter Stock at a Glance

First, let’s examine that earnings report that sent Twitter stock down more than 20%.

On the plus side, the company handily beat revenue expectations, raking in $936 million versus analyst expectations of $777 million.

Likewise, earnings per share (EPS) was also positive, with TWTR reporting 19 cents per share versus an expected 6 cents.

Finally, advertising revenue was at $808 million, 15% higher than the previous year. Total ad engagement grew nicely, too, up 27% year-over-year (YOY).

But the problem came in monetizable daily active users (mDAUs). Analysts had expected Twitter to report 195 million, but the social media company only reached 187 million. That means Twitter “grew its total mDAUs by just 1 million from last quarter.” Similarly, on a YOY basis, it managed to grow daily active users (DAUs) by 29%. While its DAUs did increase, even that fell short of expectations.

Of course, a dramatic slowdown in daily active users is not good. The market took notice. As a result, Twitter stock plunged nearly 25%, down from $52.43 to $39.47 in the following few sessions.

The Plan to Increase Engagement

Luckily, though, the social media company has already rolled out a new feature that should increase that disappointing DAU rate. On Nov. 17, Twitter announced Fleets, a posting option that only stays on the site for 24 hours.

Two company employees, Sam Haveson and Joshua Harris, wrote a blog post that introduced the new feature:

“Twitter’s purpose is to serve the public conversation – it’s where you go to see what’s happening and talk about it. But some of you tell us that Tweeting is uncomfortable because it feels so public, so permanent […] Today, we’re launching Fleets so everyone can easily join the conversation in a new way – with their fleeting thoughts.”

Moreover, tests in South Korea, Brazil, Italy and India showed that people were more willing to use Twitter to share “momentary thoughts.” Haveson and Harris noted, “Because they disappear from view after a day, Fleets helped people feel more comfortable sharing personal and casual thoughts, opinions, and feelings.”

Increasing DAUs is the key to Twitter bringing in even more revenue from advertising. Fleets could be the next pathway to that, allowing users to create and respond to photos, videos and tweets while also providing another potential avenue for paid promotions. The company also has plans to allow live broadcasting with their Fleets.

Trump and Section 230

Now in the waning days of his presidency, Donald Trump seems to be furious that his Tweets alleging election fraud are being repeatedly flagged by Twitter as false or misleading.

In response, Trump is threatening to veto the National Defense Authorization Act (NDAA) unless it ends Section 230 of the Communications Decency Act of 1996. That act shields social media companies from liability for content posted by users.

However, Trump and his supporters allege that Section 230 allows Twitter and other social media companies to go too far with censoring posts.

Yet — in a sign that Trump’s hold on Republicans may be weakening — the House and Senate are working on a bipartisan compromise to pass over his objections.

The NDAA is an over $740 billion defense policy bill. It’s always difficult for members of Congress to vote against defense appropriations and it’s certainly possible that Congress would be able to override any Trump veto. So, count me among those who see Trump’s veto threat as a minor obstacle. I think Twitter stock can shake the risk.

Bottom Line

Currently, Twitter stock is already rebounding from that lacking Q3 earnings report. So far, it has gained more than 22% since the big fall. Plus, the stock is still up over 50% year-to-date (YTD).

I like Twitter for its success in growing revenue and earnings. While the quarter was a disappointment in growing mDAUs, I’m convinced efforts like Fleets will help turn those numbers around.

All in all, this name looks like a solid social media stock headed into 2021.

— Louis Navellier and the InvestorPlace Research Staff

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Source: Investor Place