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This Is How Twitter (NYSE: TWTR) Stock Could Turn Around By David Zeiler

Following Twitter Inc.'s (NYSE: TWTR) ill-received earnings report two weeks ago, there's been a lot of hate for TWTR stock on Wall Street - and it's really not justified. Investors viewed a slowdown in the growth of active users as a sign Twitter was struggling - and they bailed on the company, driving the price down to less than half of its all-time high. But despite all that, Twitter stock could actually have a bright future. The post This Is How Twitter (NYSE: TWTR) Stock Could Turn Around appeared first on Money Morning - Only the News You Can Profit From .

Following Twitter Inc.'s (NYSE: TWTR) ill-received earnings report two weeks ago, there's been a lot of hate for TWTR stock on Wall Street.

Twitter stock, already beaten down from a high of $74 in December to about $45 in this year's tech swoon, briefly slumped below $30 last week before recovering somewhat. TWTR closed Monday at $33.94, up about 6%.

TWTR stockTwitter beat expectations on revenue, but posted another loss and sent investors to the exits with news that its active user base of 255 million grew by only 25%. That's down from 30% in the previous quarter and is the fifth straight quarter that metric has dropped.

Critics saw the slowing growth as a sign Twitter would struggle to make money going forward.

"Can they become a mainstream company? That's the open question," Ben Schachter, an analyst with Macquarie Securities, told Reuters.

Matters got even worse when the six-month TWTR lock-up period expired last week, allowing insiders to sell their shares for the first time since the IPO.

But despite the barrage of glum news, there is a chance TWTR stock could actually have a bright future. And the seeds of that future are in that very same earnings report that Wall Street hated so much.

While Wall Street focused on the slowing growth rate in Twitter's user base, it almost totally ignored the company's advertising numbers.

Ad sales overall were up 125% over the same period a year earlier, to $226 million, and international sales were up 183%.

According to eMarketer, Twitter's mobile ads, which are 80% of its sales, have grown global market share to 2.39% from 1.48% in 2012.

That's just one piece of the puzzle.

The other piece is that too many people have a mistaken notion of what kind of company Twitter really is. That's why they're convinced that Twitter can only be successful with a large and rapidly growing user base.

Here's where they're going wrong...

Don't Write Off Twitter (NYSE: TWTR) Stock Yet

Will Oremus of Slate recently pointed out that Twitter differs from Facebook Inc. (Nasdaq: FB) in one key way - a way that makes a massive user base much less critical.

"Twitter is not a social network," Oremus said. "Not primarily, anyway. It's better described as a social media platform, with the emphasis on 'media platform.'"

Unlike Facebook, which connects people to each other, Twitter is a tool to enable publishers (celebrities and other opinion leaders) to broadcast to their public (followers). And a Tweet that gains traction will be rebroadcast throughout many other types of media, greatly amplifying Twitter's reach.

So Twitter's user base, Oremus argues, is really just a small portion of its true audience.

Twitter just needs to find ways to monetize that reach - perhaps by embedding ads in the mentions it gets in other media - to unlock new sources of revenue.

Beyond that, Twitter has several tangible ways to ramp up revenue and boost TWTR stock, and most center on its natural strength as a mobile computing company.

"Long-term, there's a lot to like about Twitter," said Money Morning Defense & Tech Strategist Michael A. Robinson. "Number one, it's a huge mobile play, and mobile is one of the biggest growth areas in tech."

For instance, Twitter is in the process of rolling out 15 types of new ads aimed at e-commerce companies and mobile game developers, according to The Wall Street Journal.

But the key here is the addition of a mobile-app install unit. That means an ad for a game, for example, includes a button that takes users directly to an app store where they can buy it.

Facebook has included this tool since late 2012 - and in its most recent quarter, mobile in-app install units represented half of the company's revenue.

And then there's its mobile ad network...

Twitter's Multiple Sources of Revenue

Last year Twitter acquired mobile ad network MoPub, which is similar to the Facebook Audience Network (FAN) and Google Inc.'s (Nasdaq: GOOG, GOOGL) AdMob. These are the networks that send the ads to the apps on mobile devices that you otherwise get to use for free.

What's great about MoPub is that it gives Twitter a stream of ad revenue from ads that will never show up in a Twitter feed. The company says MoPub already reaches 1 billion users on both the Android and Apple Inc. (Nasdaq: AAPL) iOS platforms.

And like its rivals, Twitter's MoPub will be able to leverage the data the network collects on users to better target the ads. And on this score, Twitter has already been busy.

Just last month, Twitter bought a company called Gnip, a company that uses Big Data analysis to make sense of the social media company's "firehose" of information. Gnip had been selling the metrics that resulted to clients, but Twitter can just as easily incorporate that data into MoPub.

Another strategy Twitter has been exploring is e-commerce, such as the ability to send impulse-buy ads to people based on what they are tweeting about. Last week Twitter announced a partnership with Amazon.com Inc. (Nasdaq: AMZN) that lets users type #AmazonCart to respond to tweets that include an Amazon link - and put the item in their cart.

That's a lot of positive drivers for a stock many pundits have written off. IF Twitter is able to organize its efforts, the stock could pull a Facebook-like turnaround.

"Twitter stock has a great deal of long-term potential investors are overlooking," Robinson said. "They just need to execute, execute, execute, and make sure they have a defensible long-term mobile model that will lock in gains for the shareholders."

Have you given up on TWTR stock, or do you think the company's strategy will succeed in pushing the stock price higher? Share your thoughts with us on Twitter @moneymorning or Facebook.

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The post This Is How Twitter (NYSE: TWTR) Stock Could Turn Around appeared first on Money Morning - Only the News You Can Profit From.

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