Shares of Meta Platforms (NASDAQ:META) have been exploding higher this year, with a 139% year-to-date surge now in the books. With Meta’s Twitter competitor Threads now boasting more than 100 million users in just under a week, it certainly seems like Meta has found the secret sauce to help it effectively compete with Twitter — its tight integration with Instagram.
Undoubtedly, Elon Musk may not be the biggest fan of the economic moat concept, which he criticized in the past. Given the impressive user growth in Threads, though, I do believe Twitter needs to do what it can to strengthen its moat to fend off Meta’s latest addition to its already-impressive social-media Family of Apps.
The Twitter-Threads war has begun, and it’s likely to be an exciting battle between Musk and Zuckerberg, two of the greatest minds in the tech scene.
Regardless of which platform comes out on top, I view Meta’s move into the scene as incredibly wise and well-timed. Further, I don’t view Meta as having much, if anything, to lose by looking to put Twitter’s moat to the test. As such, I have to stay bullish on shares of Meta as it looks to expand into another social-media product category.
Meta Platforms: The Timing of the Threads Launch Couldn’t be Better!
Not everybody is pleased with Musk’s “made over” version of Twitter so far. Steep cuts to the workforce and outages are not a source of positive headlines. In fact, they may have slightly tarnished the reputation of the beloved microblogging platform among some. Though there were more than a handful of Twitter alternatives before Threads, none of them had the competitive edge to be a serious threat to the reigning heavyweight champ, at least not until now.
Undoubtedly, it has been a very eventful past year for Twitter. Meta’s entry into the space with Threads will make it that much more eventful as it looks to open the door to some Twitter users who may have been exploring alternatives.
Just because Meta is swooping in at a relatively opportune time does not mean it’s curtains for Twitter. There is no question that Threads’ hot start is remarkable. However, it remains to be seen how many users are simply trying out the platform, only to head back to Twitter in a couple of days, weeks, or months. Indeed, it can be tough to gauge users’ next moves.
While Musk may criticize moats, I do think he found a relatively wide-moat company in Twitter. Twitter’s biggest moat source, I believe, is its massive user base, which boasts over 237 million daily active users. Such numbers make recent growth in Threads somewhat less jaw-dropping.
Looking ahead, I expect Twitter’s size will continue to work in its favor as the company explores intriguing new ideas and monetization opportunities. Meta’s Threads will need to stay on its toes if it’s to put up a good fight with Twitter. Given Meta’s mixed success in targeting TikTok with Reels, I’d still have to give the advantage to Twitter, even as it goes on the defensive.
Threads: Standing on the Back of a Giant in Instagram
One thing that Threads has going for it is the tight knit with the incredibly popular Instagram. It’s the seamless integration that could cause existing Instagram fans to consider using Threads over Twitter. Indeed, powerful network effects may be the edge that allows Instagram’s Threads to be a credible challenger to the throne.
Just how effective of an onramp can Instagram be for Threads? It remains to be seen. Instagram’s Threads could certainly make a dent in Twitter’s user base. That said, the billion-dollar question is if seamless integration is enough for the average Twitter user to justify making a new account and learning the ropes with a new user interface.
Is META Stock a Buy, According to Analysts?
Turning to Wall Street, META stock comes in as a Strong Buy. Out of 39 analyst ratings, there are 35 Buys and four Holds.
The average Meta Platforms price target is $305.53, implying upside potential of 2.4%. Analyst price targets range from a low of $220.00 per share to a high of $380.00 per share.
The Bottom Line on Meta and Threads
According to web analytics firm Similarweb, Twitter traffic decreased when Threads went live in its first two days. This is not really a surprise, but it’s food for remarkable headlines, nonetheless.
It’s a hot start for Threads, but don’t count Twitter out just yet. It’s too early in the game to judge how sticky Instagram Threads users will be. Further, it’s never a good idea to dismiss any firm owned by Elon Musk.
