Twitter TWTR stock has surged over 25% in the last three months, while tech giants from Apple AAPL to Amazon AMZN have fallen as part of the broader market pullback. So, the question is should investors buy shares of Twitter heading into 2019?
Twitter has been wrapped up in the overarching wave of government and some consumer backlash over its role in the spread of misinformation and “fake news.” The social media firm, like its much larger peer Facebook FB and Google GOOGL, could face increased scrutiny and even possible government intervention over their control of what have become some of the most vital and important news and information platforms in North America and the world.
Clearly, investors have to decide if they want any part of these companies at the moment. But very soon the Twitters of the world could become just a small part of the larger privacy conversation as more people begin to realize that their information and data is everywhere. With that said, Twitter looks poised to remain a vital news outlet not only for everyday citizens, but for massive corporations and media companies as well.
Plus, Twitter has actively tried to rid its platform of fake accounts and robots, which should help it become more profitable in the long-term because advertisers know they will reach real people. Furthermore, Twitter’s push into live streaming video, through partnerships with everyone from Disney’s DIS ESPN to NBCUniversal CMCSA and Activision Blizzard ATVI, will help it attract more ad dollars as non-ad supported powers such as Netflix NFLX countie to drag consumers away from linear TV.
Last quarter, Twitter’s adjusted earnings soared 110% to reach $0.21 per share, which also marked the fourth straight quarter that it posted GAAP profitability. Meanwhile, Twitter’s quarterly revenues climbed 29%. Maybe more importantly, Twitter’s total ad engagements surged 50% and cost per engagement sunk 14%. These two metrics could be signs that the company is headed in the right direction since advertising accounted to 86% of quarterly revenues.
Owning Twitter stock has been a rollercoaster over the last five years, with its shares down 36% over this stretch. But, as we can see from the chart above, the past 24 months have been much more kind to TWTR.
Still, despite its strong run over the last three months and two years, Twitter stock currently sits at roughly $36 per share. This marked a roughly 25% downturn from its 52-week high of $47.79 a share and could set up a solid buying opportunity for investors high on Twitter.
Outlook & Earnings Trends
Looking ahead, our current Zacks Consensus Estimate calls for Twitter’s Q4 revenues to surge 19% to reach $870.64 million. The company’s fiscal 2018 revenues are expected to jump over 22.5% to reach $3.0 billion. Peeking further ahead, the social media firm’s fiscal 2019 revenues are projected to pop 14.6% above our 2018 estimate.
Meanwhile, at the bottom end of the income statement, Twitter’s adjusted Q4 earnings are projected to soar 36.8% to reach $0.26 per share. More impressively, the firm’s full-year earnings are projected to skyrocket 81.8% to $0.80 per share.
Investors should also note that Twitter has received a ton of upward earnings estimate revisions over the past 60 days for Q4, as well as fiscal 2018 and 2019. However, we should note that Twitter’s fiscal 2019 EPS figure is expected to come in just 10.5% above our current-year projection.
With that said, the company’s fourth quarter and fiscal 2018 and 2019 earnings revisions have trended more positively over the last 60 days. This means that at least some analysts expect the company’s earnings to come in higher than they did before the quarter got underway.
Twitter’s positive earnings revisions help it earn a Zacks Rank #1 (Strong Buy) at the moment. Long-term, Twitter is likely to continue to grow its bottom line as it attracts more advertisers in the streaming entertainment age. Still, Twitter’s projected growth slowdown in 2019 might scare away many investors.
The potential impact of government intervention also hangs over Twitter and other tech firms. Therefore, it is up to investors to decide if they think the company’s positives outweigh any drawbacks.
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