Jefferies Equity Research Analyst Brent Thill joins Yahoo Finance Live to discuss what Tesla CEO Elon Musk's appointment to Twitter's board means for the social media platform and its users.
Video Transcript
BRIAN SOZZI: Twitter remains the top trending ticker on the Yahoo Finance platform in the wake of Elon Musk's new investment and him now joining the board. Jefferies analyst Brent Thill covers Twitter and joins us now. Brent, as someone that has covered Twitter for a while, when you see news that Elon Musk is now joining the board, what are some of your first thoughts?
BRENT THILL: I think it's really good. I mean, they need to shake things up. Twitter really has been caught in a rut, and they haven't been innovating at the pace they could. And certainly, the user growth has not been what they want. No one's jumped up and down and said, hey, I really love this feature or that feature. We had one ad expert last week tell us that Snap had 10 improvements to their platform in 2021 and that he hadn't seen that in a decade at Twitter. So that's coming from the guy, the advertising experts that actually say where you're going to-- where these companies are going to spend money.
So I think ultimately, having Elon, who obviously understands design aesthetics, the usability better than anyone, as the owner of Tesla car, you-- he's going to be, I think, a huge addition and shake the tree here. So, obviously, it's a [INAUDIBLE] on the board. I think this is nothing but continued good evolution of the story. And again, you know, the new CEO coming in last fall with now with Elon, I think we haven't seen it yet. There hasn't been any signs that, hey, fundamentals have significantly improved. But I think this is a great foundation now to put them in a much better position going forward.
BRIAN SOZZI: Brent, is Elon Musk effectively running Twitter at this point?
BRENT THILL: Well, I mean, anyone with his stature, power, certainly, he's going to have a huge seat and voice at the table. He's not running it, right? That's not happening. But I think ultimately, what is he going to eventually do? Is he going to, you know-- as someone said yesterday, right, that he could make his stake way bigger than 9% plus. So I think he has a huge stake, but not running it today, but over time, you know, I don't think his intention is to run the company. But he's definitely going to have massive influence.
JULIE HYMAN: And so, Brent, it's Julie here. I keep trying to figure out what that mass of influence is going to be like. I mean, to your point, I think there's broad acknowledgment that Twitter needs to change something. When you look at what Musk has tweeted, at least recently, the focus has been on, quote unquote, "free speech," and opening up the platform more. But what the heck does that mean, really, effectively? Does it mean bringing Donald Trump back? Does it mean taking off some of the guardrails at Twitter? And is that really the product improvement that Twitter needs?
BRENT THILL: The last thing we need is more noise in the Twitter system, right? We need dialogue and debates. But I think ultimately, anyone that's on Twitter understands what I'm about to say, is that the product is like being in your dad's Oldsmobile way back when. It's not Tesla-like. You know, the dark mode for climate control to go to the grocery store-- I mean, no one thought about that. There's only features that they can enhance to the Tesla analogy of improvement in the UI and usability interests.
You know, if I'm interested in a particular topic or sports or travel, you know, today, it's just, there's a lot of noise. And so I'm OK with some of the noise. I think some of the users like that. But ultimately there's some users that want a really refined experience. And I don't think anyone's been able to get that kind of experience. So I think there's a balanced line of, hey, having freedom of what you're going to say on a platform, but also making it usable and digestible for the end user. And they need to do a way better job of that. I don't think there's an issue of, hey, what's someone's view on a particular topic? You can find that on Twitter.
JULIE HYMAN: And so, Brent, I'll come back--
BRENT THILL: It's just something you can find in a relevant, searchable, easy way, you know.
JULIE HYMAN: Sorry, Brent, I think we had a little bit of an interruption in the line, but so I want to come back to the note that you put out in reaction to the initial news yesterday that he had taken the stake, where you said, you know, maybe 27% jump is a little bit of an overreaction. Do you still think that's the case with him taking a board seat now?
BRENT THILL: I think what we've said is historic peak multiples are higher the stock could go. You know, there's $10 to $20 billion of incremental value on the market cap if we go back towards peak. And obviously, we hit trough attack, and we're now seeming to find a bottom and starting to slowly climb back up. So we think there's upside relative to the historic, but again, there's-- this is still a fundamental showing story. You know, they haven't shown it. It's all about the hype that they're going to show it.
BRIAN SOZZI: Brent, last one for me here, does this involvement by Elon in Twitter just underscore how far they are behind Snap? You know, as you mentioned, a lot of new product updates, and even with Elon in the mix here on Twitter, Snap is still the better stock to buy.
BRENT THILL: Yeah, I mean, that's our view. I mean, Snap is growing their user base rapidly. As I mentioned earlier, the advertising comments about the innovation on the platform, the AR/VR. You look at the Maps. You look at what they're doing around short form video, what they're doing in video games. I mean, it's become a real destination. The younger audience is now growing up and aging into it. Rather than just sending messages now, they're influenced by brands that they can effectively influence each other with branding and shopping.
And just the overall depth and breadth of their platform is so far superior. And so we continue to believe, you know, it's early innings. Pre-pandemic, obviously, they said they're going to grow at a 50% plus clip. Obviously, that number's come off, given the IDFAs from Apple and other ad headwinds that we're seeing. But when a company puts out a stake and says, hey, we can grow 50% indefinitely, which, obviously, they're not going to make the goal, but let's say it's 30% plus, 40% plus, not 50%, you know, you're still talking incredible growth. And that growth is significantly above that of the other social platforms.
So we like the innovation. We like the management team. We like the approach that they're taking on the Snap platform. And again, that comes from the advertisers, you know, not just our view of the financials. And they're paying the bill, right? We're not paying the bill to be on Snap. The advertisers are.
JULIE HYMAN: Brent, thank you so much for your perspective. I'm glad we got some time with you this morning to react to this news and to talk about the space overall. Brent Thill is with Jefferies. Thank you.
