Why Twitter Stock Jumped 11.2% in May

By Evan Niu, CFA Markets Fool.com

What happened

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Shares of Twitter (NYSE: TWTR) enjoyed strong gains in the month of May, gaining 11.2%, according to data provided by S&P Global Market Intelligence.

So what

There were a few notable positive catalysts for Twitter last month. For starters, shares were enjoying some bullish momentum in the wake of first-quarter results, which were released at the very end of April. Cost-cutting helped drive the bottom-line beat, as Twitter continued to better align its cost structure with the size of its business. Shortly after reporting earnings, CEO and co-founder Jack Dorsey filed a Form 4 with the SEC on the last trading day of April indicating that he had purchased approximately $9.5 million worth of Twitter stock in open-market purchases.

Twitter co-founders. Left to right: Evan Williams, Biz Stone, Jack Dorsey. Image source: Twitter. Copyright Marisa Allegra Williams (@marisa) for Twitter, Inc.

On May 2, Mark Cuban disclosedthat he had started to invest in Twitter, believing that the company has made progress in artificial intelligence. Shares jumped again when co-founder Biz Stone announced that he would be returning to the company he helped start. Stone had left Twitter in 2011 and started Jelly in 2013, a hybrid between a search engine and Q&A platform.

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Pinterest agreed to acquireJelly in March for an undisclosed sum. Stone's Medium.compost announcing his return to Twitter noted, "The deal did not require me to work at the company we sold to, but I'm the type of person who has to keep working."

Now what

Twitter's financial shape is improving, but challenges remain going forward. User engagement is trending higher, but the company needs to prove that it can successfully monetize that usage to continue impressing investors. Live video is the next battleground for social-media companies, and those investments can be quite hefty given the bandwidth and infrastructure requirements to execute on live-video strategies.

As far as Stone's return is concerned, he'll be focusing on Twitter's corporate culture, which is largely what he did before he left years ago. He notes that he's "not replacing anyone at Twitter," but rather "filling the 'Biz shaped hole'" from his departure.

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Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Twitter. The Motley Fool has a disclosure policy.