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Bull of the Day: Twitter Inc. (TWTR)

Brian Hamilton
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Bull of the Day: Twitter Inc. (TWTR)

Twitter Inc. (TWTR), a Zacks Rank #1 (Strong Buy) is a public, real-time, global platform where any user can create a Tweet and any user can follow other users. The platform is unique in its simplicity: Tweets are limited to 140 characters of text. This constraint makes it easy for anyone to quickly create, distribute and discover content that is consistent across our platform and optimized for mobile devices. As a result, Tweets drive a high velocity of information exchange that makes Twitter uniquely live.

Recent Earnings Data

The company announced Q1 18 earnings data in late April where it crushed the Zacks consensus earnings and revenue estimates for the fifth consecutive quarter.  On a year over year basis, revenues improved by 21% while earnings grew by just under 150%.  Also, average monthly active users rose to 336 million a +3% increase from the year ago quarter, and average daily active users grew by 10% YoY.  The biggest area of improvement for the company is coming from the international segment where revenues improved by +53% YoY, and was the highest since the third quarter 2016. 

More Positive News for the Future

In the beginning of May, management announced that were expanding its premium video lineup with 30 new programs and renewals.  This programming includes sports, gaming, news, entertainment with big partners like Disney/ESPN, Viacom, NBCUniversal, and Vice Media.  This is in addition to previous current live deals that are in place with Live Nation, Bloomberg, and the PGA.  This announcement was after management made several very positive comments regarding its video segment during its earnings presentation; it accounts for more than 50% of advertisement revenues, it is the fastest growing segment for advertisement growth, and that views almost doubled in the past year. 

Management’s Take

According to Jack Dorsey, CEO, “The first quarter was a strong start to the year. We grew our audience and engagement, marking another quarter of double digit year-over-year DAU growth, and continued our work to make it easier to follow topics, interests, and events on Twitter. We also introduced a new framework to think more cohesively about the issues affecting our service, including information quality and safety. This holistic approach will help us more effectively address these challenges by viewing them through the broader lens of the health of the public conversation, and we're encouraged by our initial progress in this area.”

Price and Earnings Consensus Graph

As you can see in the graph below, the company’s stock price had been languishing for 2016, and most of 2017, but has begun to turn it around in 2018.

Twitter, Inc. Price and Consensus

Twitter, Inc. Price and Consensus | Twitter, Inc. Quote

Future Earnings Estimates Moving Upwards

Over the past 30 days, earnings estimates for Q2 18, Q3 18, FY 18 and FY 19 have all been positively revised; Q2 18 improved from $0.12 to $0.17, Q3 18 rose from $0.13 to $0.17, FY 18 was lifted from $0.59 to $0.74, and FY 19 increased from $0.72 to $0.88.

Bottom Line

Both international revenue growth and broadening video options are expected to drive revenues over the next several quarters.  At the same time management is focused on U.S. growth with its live streaming content deals, and better ad formats.  Overall the company is moving in the right direction, and still has many opportunities for continued growth.

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