Twitter Has Finally Won Over Wall Street

What’s the deal with Twitter (TWTR)  these days? The stock has been plagued ever since its IPO in November 2013. In the beginning, the social media giant struggled with profitability. But as soon as it looked like Twitter was making money, growth became an issue. As revenue has continued to grow, growth has continued to slow.

During the most recent quarter, that trend continued. In fact, Twitter saw less growth during the last quarter than Facebook—a paltry 1.4%. This is especially worrisome considering that Twitter has nowhere near the magnitude of users Facebook has and both are seeing similar growth rates. So why did Twitter’s stock jump 16% on Friday?

Investors finally convinced?

Twitter’s stock has been one of the more volatile over the past year. But it seems as if the company is finally convincing Wall Street that its business model is sustainable. Despite horrible growth, Twitter was still able to almost double its revenue over the same period. Of course, Twitter has been doubling its revenue for years now. But this time, advertising revenue was the main driver. In contrast, about half of last quarter’s revenue was attributed to Twitter’s data-licensing business.

The second thing that seems to have investors convinced is Twitter’s outlook for 2015. For the full year, Twitter forecasts between $2.3 and $2.5 billion in revenue, beating what analysts estimated for the year.

What about the growth?

While ad growth is still growing, slowing user growth can put Twitter in a vulnerable position over the next few years. The company blames its recent paltry growth on Apple (AAPL). As iOS 8 was rolled out, a bug in Twitter’s iOS integration cost 4 million users. Additionally, it seems as if the fourth quarter is generally slower.

Twitter management is also attempting to shift the way analysts look at the social media network’s growth. According to the Wall Street Journal, “It wants outlying audiences—those that visit Twitter but don’t log in and those who see Twitter content on other properties, known as the syndicate audience—to be counted as part of its overall heft.” Market research shows that close to 160 million people across the world visit Twitter without “actively” using it. If Twitter starts to talk about those people more, it could make it easier for investors to see the value in what Twitter provides.

Other developments

Twitter is still doing whatever it can to fight for more users. The company recently introduced Twitter Video, a feature allowing users to upload 30-second video clips. It hopes to follow in Facebook’s footsteps, which has seen major revenue growth from its own video feature in the last year. Twitter also struck a deal recently with Google to show tweets in the results of Google searches. The two tech companies previously had a deal from 2009 to 2011. The result of a renewal is more eyeballs on the platform, which, of course, leads to more users.

As Twitter continues its operation for more users, I’m confident investors will begin to warm up and see Twitter for the great value opportunity it really is.