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Buy Twitter Stock On Long-Term Strength After Short-Sighted Selloff
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Shares of Twitter plummeted over 18% Friday morning after the company reported its Q2 financial results. Investors fled the social media firm based on a sequential user decline, but the slight drop off should have been anticipated as Twitter actively aimed to remove fake accounts, which will improve long-term quality. Plus, the company’s advertising business is booming.
Q2 Overview
Twitter’s adjusted quarterly earnings surged from $0.08 per share in the year-ago quarter to hit $0.17 per share, which came in line with the Zacks Consensus Estimate. The firm also posted its third-straight quarterly profit—after years of losses. Meanwhile, the company’s top line surged 24% to $711 million, topping our $700 million revenue estimate.
Twitter closed the quarter with 335 million monthly active users, which represented just under a 3% year-over-year gain from 326 million in the second quarter of 2017. However, MAU’s slipped by one million from the previous quarter, marking the first sequential dip since the second quarter of last year. Twitter said it expects its MAUs to drop by mid-single-digit millions in Q3. And this is what likely sent Twitter stock down big since a third-quarter decline would mark Twitter’s first-ever consecutive declines.
The social media company’s Friday sell-off is similar to Facebook’s recent fire sale on the back of slowing user growth and margin concerns. Yet today’s Twitter decline likely represents a great buying opportunity, not just because shares of TWTR will come at a face value discount, but based on the fact that nearly all of Twitter’s Q2 financial results were very encouraging.
Reasons to Be Excited
Twitter’s average daily active users surged by 11% from the prior year. The gains helped the company continue to improve the rest of its business, specifically advertising. The firm’s total ad revenues climbed by 23% to hit $601 million, accounting for roughly 85% of total Q2 revenues.
TWTR’s total ad engagements skyrocketed 81%, which might be one of the most important figures the company reported and will prove vital to Twitter’s long-term viability. The firm’s cost per engagement also decreased by 32%, which means the social media platform continues to look more attractive to advertisers clamoring to reach consumers. Twitter’s improving ad engagements stems mostly from its live streaming and overall video push.
The company’s U.S. revenues popped by 10% to reach $367 million, while international revenue soared 44% to touch $344 million. Twitter noted that the second quarter was the first time international advertising sales came in above U.S. ad dollars—a trend the firm projects will continue in the near future. TWTR’s international growth should be celebrated as the U.S. market becomes more saturated.
Twitter added 50 new video agreements during the second quarter, including more partnerships with Disney’s (DIS - Free Report) ESPN, NBCUniversal (CMCSA - Free Report) , and Viacom . This comes after the firm signed 30 new partnerships during the first quarter. Twitter also noted that it invested more heavily into its video infrastructure.
“We’re also continuing to make it easier for people to find and follow breaking news and events, and have introduced machine learning algorithms that organize the conversation around events, beginning with the World Cup,” CEO Jack Dorsey said in a statement. “These efforts contributed to healthy year-over-year daily active usage growth of 11 percent and demonstrate why we’re investing in the long-term health of Twitter.”
Looking Ahead
The small sequential decline in MAUs will likely help make Twitter a more viable platform because users know they are interacting with real people and real accounts and not being flooded with spam. Advertisers are also set to spend more money on Twitter because of its live video push. And, more simply, Twitter is going to grab ad dollars as linear, ad-supported TV slowly fades in the age of Netflix (NFLX - Free Report) , Amazon Prime (AMZN - Free Report) , and Hulu.
Investors should also note that Twitter’s data licensing and “other revenue” surged 29% to $109 million. This business, which involves the selling of Twitter data to outside sources, is likely to expand as there are few other platforms that offer Twitter’s up-to-the-second updates on almost anything imaginable.
Shares of Twitter traded at $16.84 a year ago, they were trading at $35.06 following Friday morning’s 18% decline.
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Image: Bigstock
Buy Twitter Stock On Long-Term Strength After Short-Sighted Selloff
Shares of Twitter plummeted over 18% Friday morning after the company reported its Q2 financial results. Investors fled the social media firm based on a sequential user decline, but the slight drop off should have been anticipated as Twitter actively aimed to remove fake accounts, which will improve long-term quality. Plus, the company’s advertising business is booming.
Q2 Overview
Twitter’s adjusted quarterly earnings surged from $0.08 per share in the year-ago quarter to hit $0.17 per share, which came in line with the Zacks Consensus Estimate. The firm also posted its third-straight quarterly profit—after years of losses. Meanwhile, the company’s top line surged 24% to $711 million, topping our $700 million revenue estimate.
Twitter closed the quarter with 335 million monthly active users, which represented just under a 3% year-over-year gain from 326 million in the second quarter of 2017. However, MAU’s slipped by one million from the previous quarter, marking the first sequential dip since the second quarter of last year. Twitter said it expects its MAUs to drop by mid-single-digit millions in Q3. And this is what likely sent Twitter stock down big since a third-quarter decline would mark Twitter’s first-ever consecutive declines.
The social media company’s Friday sell-off is similar to Facebook’s recent fire sale on the back of slowing user growth and margin concerns. Yet today’s Twitter decline likely represents a great buying opportunity, not just because shares of TWTR will come at a face value discount, but based on the fact that nearly all of Twitter’s Q2 financial results were very encouraging.
Reasons to Be Excited
Twitter’s average daily active users surged by 11% from the prior year. The gains helped the company continue to improve the rest of its business, specifically advertising. The firm’s total ad revenues climbed by 23% to hit $601 million, accounting for roughly 85% of total Q2 revenues.
TWTR’s total ad engagements skyrocketed 81%, which might be one of the most important figures the company reported and will prove vital to Twitter’s long-term viability. The firm’s cost per engagement also decreased by 32%, which means the social media platform continues to look more attractive to advertisers clamoring to reach consumers. Twitter’s improving ad engagements stems mostly from its live streaming and overall video push.
The company’s U.S. revenues popped by 10% to reach $367 million, while international revenue soared 44% to touch $344 million. Twitter noted that the second quarter was the first time international advertising sales came in above U.S. ad dollars—a trend the firm projects will continue in the near future. TWTR’s international growth should be celebrated as the U.S. market becomes more saturated.
Twitter added 50 new video agreements during the second quarter, including more partnerships with Disney’s (DIS - Free Report) ESPN, NBCUniversal (CMCSA - Free Report) , and Viacom . This comes after the firm signed 30 new partnerships during the first quarter. Twitter also noted that it invested more heavily into its video infrastructure.
“We’re also continuing to make it easier for people to find and follow breaking news and events, and have introduced machine learning algorithms that organize the conversation around events, beginning with the World Cup,” CEO Jack Dorsey said in a statement. “These efforts contributed to healthy year-over-year daily active usage growth of 11 percent and demonstrate why we’re investing in the long-term health of Twitter.”
Looking Ahead
The small sequential decline in MAUs will likely help make Twitter a more viable platform because users know they are interacting with real people and real accounts and not being flooded with spam. Advertisers are also set to spend more money on Twitter because of its live video push. And, more simply, Twitter is going to grab ad dollars as linear, ad-supported TV slowly fades in the age of Netflix (NFLX - Free Report) , Amazon Prime (AMZN - Free Report) , and Hulu.
Investors should also note that Twitter’s data licensing and “other revenue” surged 29% to $109 million. This business, which involves the selling of Twitter data to outside sources, is likely to expand as there are few other platforms that offer Twitter’s up-to-the-second updates on almost anything imaginable.
Shares of Twitter traded at $16.84 a year ago, they were trading at $35.06 following Friday morning’s 18% decline.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>