Why Twitter Stock Gained 14.5% in May

What happened

Micro-blogging site Twitter (NYSE: TWTR) outpaced the market last month by gaining 14.5%, compared to a 2% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

^SPX data by YCharts.

The rally has contributed to strong recent returns for the stock, which has gained over 70% so far in 2018.

So what

Investors have been feeling more optimistic about Twitter’s growth opportunities lately. Sure, its business isn’t seeing nearly the user gains or the profitability that rival Facebook has managed. However, Twitter announced a healthy 21% spike in revenue in the most recent quarter as it logged its sixth consecutive quarter of double-digit growth in daily active users.

Image source: Getty Images.

Now what

Twitter counted 336 million monthly active users in the first quarter of 2018, up only slightly from 327 million a year ago. CEO Jack Dorsey and his team will need to push that number far higher in order to reach their goals of building a widely relevant content platform.

Advertising revenue will likely rise at a faster pace than users, as the company learns to better monetize the content it showcases, especially video. These positive trends make it likely that Twitter will see its sixth year of improving earnings results as the company continues to aim toward finally achieving GAAP profitability on an annual basis.

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Demitrios Kalogeropoulos owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook and Twitter. The Motley Fool has a disclosure policy.

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