It has been about a month since the last earnings report for Twitter, Inc. . Shares have added about 7.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
Twitter reported strong results for the third quarter of 2017. Non GAAP earnings per share of 10 cents came in much ahead of the Zacks Consensus Estimate of 6 cents per share. Revenues of $590 million were in line with the consensus mark.
The encouraging results overshadowed Twitter’s revelation that it has been miscalculating MAUs since 2014, which resulted in the company overstating MAUs.
In a letter to shareholders, Twitter said “We discovered that since the fourth quarter of 2014 we had included users of certain third-party applications as Twitter MAUs that should not have been considered MAUs. These third-party applications used Digits, a software development kit of our now-divested Fabric platform that allowed third-party applications to send authentication messages via SMS through our systems, which did not relate to activity on the Twitter platform.”
Twitter has now adjusted for the inflated numbers since the fourth quarter of 2016. The company doesn’t have the data to reconcile numbers for the period prior to fourth quarter 2016. The company also added that daily average users (DAUs) were not affected.
In third-quarter 2017, Twitter reported adjusted MAUs of 330 million, up 1.2% sequentially and 4% on a year-over-year basis. There has been an adjustment of 1-2 million users per quarter since the fourth quarter of 2016, added Twitter.
Daily average users (DAUs) were up 14% year over year.
Quarterly Numbers in Details
The company incurred GAAP loss of 3 cents per share, compared with loss of 15 cents in the prior-year quarter.
However, on a year-over year-basis, revenues fell 4%, mostly due to winding of the TellApart business. Advertising revenues were down 8% in the quarter to $503 million. As far as ad metrics are concerned, there was a 99% year-over-year surge in ad engagements. However, cost per ad engagement was down 54%, given the shift to auto-play video, which has a lower cost-per-view compared to click-to-play.
Data licensing and other revenues increased 22% to $87 million. Twitter earned nearly 43.7% of its revenues from international markets. International revenues increased 6% year over year to $258 million in the reported quarter while U.S. revenues decreased 11% year over year to $332 million.
Twitter’s adjusted EBITDA rose 14% to $207 million and adjusted EBITDA margin was 35%.
The company reported an operating loss of $17.5 million, which compared favourably with a loss of $96.3 million reported in the year-ago quarter. Total cost and expenses were down 16.1% to $582.4 million.
Balance Sheet & Cash Flow
At the end of Sep 30, 2017, cash and cash equivalents (short-term investments) were $4.3 billion compared with $3.8 billion at the end of Dec 31, 2016. For the quarter, cash flow from operations was $239.9 million and adjusted free cash flow was $189.2 million.
Outlook
For the current quarter, adjusted EBITDA is expected to be in the range of $220–$240 million while EBITDA margin is likely to be in a band of 35–36%. Capex is expected to be $110 million and stock-based compensation is expected to be in the band of $90 million to $100 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter. While looking back an additional 30 days, we can see even more upward momentum. There have been eight moves higher in the last two months.
VGM Scores
At this time, Twitter's stock has a strong Growth Score of A, however its Momentum is lagging a lot with an F. The stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is solely suitable for growth investors.
Outlook
While estimates have been broadly trending upward for the stock, the magnitude of these revisions has been net zero. The stock has a Zacks Rank #1 (Strong Buy). We are looking for an above average return from the stock in the next few months
Image: Bigstock
Why Is Twitter (TWTR) Up 7.5% Since the Last Earnings Report?
It has been about a month since the last earnings report for Twitter, Inc. . Shares have added about 7.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
Twitter reported strong results for the third quarter of 2017. Non GAAP earnings per share of 10 cents came in much ahead of the Zacks Consensus Estimate of 6 cents per share. Revenues of $590 million were in line with the consensus mark.
The encouraging results overshadowed Twitter’s revelation that it has been miscalculating MAUs since 2014, which resulted in the company overstating MAUs.
In a letter to shareholders, Twitter said “We discovered that since the fourth quarter of 2014 we had included users of certain third-party applications as Twitter MAUs that should not have been considered MAUs. These third-party applications used Digits, a software development kit of our now-divested Fabric platform that allowed third-party applications to send authentication messages via SMS through our systems, which did not relate to activity on the Twitter platform.”
Twitter has now adjusted for the inflated numbers since the fourth quarter of 2016. The company doesn’t have the data to reconcile numbers for the period prior to fourth quarter 2016. The company also added that daily average users (DAUs) were not affected.
In third-quarter 2017, Twitter reported adjusted MAUs of 330 million, up 1.2% sequentially and 4% on a year-over-year basis. There has been an adjustment of 1-2 million users per quarter since the fourth quarter of 2016, added Twitter.
Daily average users (DAUs) were up 14% year over year.
Quarterly Numbers in Details
The company incurred GAAP loss of 3 cents per share, compared with loss of 15 cents in the prior-year quarter.
However, on a year-over year-basis, revenues fell 4%, mostly due to winding of the TellApart business. Advertising revenues were down 8% in the quarter to $503 million. As far as ad metrics are concerned, there was a 99% year-over-year surge in ad engagements. However, cost per ad engagement was down 54%, given the shift to auto-play video, which has a lower cost-per-view compared to click-to-play.
Data licensing and other revenues increased 22% to $87 million. Twitter earned nearly 43.7% of its revenues from international markets. International revenues increased 6% year over year to $258 million in the reported quarter while U.S. revenues decreased 11% year over year to $332 million.
Twitter’s adjusted EBITDA rose 14% to $207 million and adjusted EBITDA margin was 35%.
The company reported an operating loss of $17.5 million, which compared favourably with a loss of $96.3 million reported in the year-ago quarter. Total cost and expenses were down 16.1% to $582.4 million.
Balance Sheet & Cash Flow
At the end of Sep 30, 2017, cash and cash equivalents (short-term investments) were $4.3 billion compared with $3.8 billion at the end of Dec 31, 2016. For the quarter, cash flow from operations was $239.9 million and adjusted free cash flow was $189.2 million.
Outlook
For the current quarter, adjusted EBITDA is expected to be in the range of $220–$240 million while EBITDA margin is likely to be in a band of 35–36%. Capex is expected to be $110 million and stock-based compensation is expected to be in the band of $90 million to $100 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter. While looking back an additional 30 days, we can see even more upward momentum. There have been eight moves higher in the last two months.
Twitter, Inc. Price and Consensus
Twitter, Inc. Price and Consensus | Twitter, Inc. Quote
VGM Scores
At this time, Twitter's stock has a strong Growth Score of A, however its Momentum is lagging a lot with an F. The stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is solely suitable for growth investors.
Outlook
While estimates have been broadly trending upward for the stock, the magnitude of these revisions has been net zero. The stock has a Zacks Rank #1 (Strong Buy). We are looking for an above average return from the stock in the next few months