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The Bull Case for Twitter (TWTR) Stock After Impressive Q3
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Shares of Twitter surged as high as 15% Thursday after the company posted third-quarter financial results that impressed investors. It wouldn’t be a shock to see TWTR stock slip again sometime soon as investors continue to worry about the potential for government regulation and slow user growth. But let’s see why Twitter stock might be a bull in the long run.
Q3 Overview
Twitter posted adjusted quarterly earnings of $0.21 per share, which crushed our Zacks Consensus Estimate that called for $0.14 per share. Investors were also likely pleased to see that the social media company’s adjusted earnings soared 110% from the year-ago period’s $0.10 per share. The third quarter also marked the fourth straight period in which Twitter posted GAAP profitability.
Meanwhile, Twitter’s quarterly revenues jumped roughly 29% from $590 million to $758.1 million. This growth represented the largest quarterly increase since the first quarter of 2016. Plus, Twitter’s top line blew away our $703.6 million estimate.
The Bull Details
Much of the negativity surrounding Twitter going into the report focused on its users. Twitter has reportedly removed millions of accounts, many of which were never reported in their official user figures in the first place, in an effort to clean up its platform from spam accounts and “fake news.”
Twitter’s average daily active user base jumped 9%, which fell short of both the year-ago period 14% growth and Q2’s 11% jump. But nearly 10% DAU growth at a time when investors worried that its user base would take a massive hit is good sign.
With that said, the social media company’s average monthly active users slipped from 330 million in Q3 of 2017 to 326 million. Twitter MAU’s also dropped by 9 million sequentially.
Despite the decline in users, Twitter saw its ad revenues jump 29% from the year-ago period to $650 million. “We’re doing a better job detecting and removing spammy and suspicious accounts at sign-up,” CEO Jack Dorsey said in a company statement.
“This quarter’s strong results prove we can prioritize the long-term health of Twitter while growing the number of people who participate in public conversation.”
Video
Twitter said that video ads accounted for more than half of its total Q2 ad revenue. In the U.S., overall ad revenue popped 32% to reach $348 million. Plus, international ad revenues grew by 26% to $302 million. Maybe more importantly, Twitter’s total ad engagements soared 50% and cost per engagement sunk 14%.
The company’s constant push into live streaming video should help it continue to become more attractive to advertisers. “We are demonstrating Twitter’s unique value proposition for advertisers through innovative ad formats, better relevance and continued improvement in ROI,” Twitter CFO Ned Segal said in a statement. “Advertisers are choosing Twitter to reach the most valuable audience when they are most receptive.”
Twitter, like Facebook , has tried to grab live video deals and pump out streaming content, as the likes of Amazon (AMZN - Free Report) and Netflix (NFLX - Free Report) continue to pull people away from traditional, ad-supported TV.
Twitter currently has deals with Disney’s (DIS - Free Report) ESPN, NBCUniversal (CMCSA - Free Report) , Viacom , Activision Blizzard , and others. The company also offers more live sports, which includes weekly live MLS and MLB games.
Data Licensing
Twitter remains an invaluable source for news outlets and regular users to distribute instant information. This helped Twitter’s other revenue source, its data licensing business, see its revenues jump 25% to $108 million.
Investors should note that some have said that Twitter’s data licensing unit could end up coming under government scrutiny. But it doesn’t seem to be a concern just yet. Twitter’s CEO tried to assure analysts and investors that there is nothing to worry about earlier this year.
“We are different from our peers in that Twitter is public. We serve the public conversations, so all of our data is out in the public, out in the open,” Dorsey said on a Q1 conference call. “And our data business just organizes that public data in real time to make it easier for brands, researchers, and organizations to utilize it.”
Twitter later followed up with a statement on its platform that said: “To be clear - our data licensing business does not sell DMs” (direct messages). Any reports to the contrary are wrong.”
Bottom Line
Twitter has prioritized the health of the platform over user growth, which should theoretically help the firm in the long run.
Twitter is currently a Zacks Rank #1 (Strong Buy) that is expected to see its adjusted fiscal 2018 earnings skyrocket over 59%, based on our current Zacks Consensus Estimate. Plus, Twitter’s full-year revenues are projected to pop by 20%.
Clearly, it seems that Twitter looks ready to become a more profitable company while it grows both its ad revenues and data business on the back of increased user engagement. The bull case simply put is: Advertisers need to reach people somewhere and the decline of linear TV and print media has made them harder to find.
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The Bull Case for Twitter (TWTR) Stock After Impressive Q3
Shares of Twitter surged as high as 15% Thursday after the company posted third-quarter financial results that impressed investors. It wouldn’t be a shock to see TWTR stock slip again sometime soon as investors continue to worry about the potential for government regulation and slow user growth. But let’s see why Twitter stock might be a bull in the long run.
Q3 Overview
Twitter posted adjusted quarterly earnings of $0.21 per share, which crushed our Zacks Consensus Estimate that called for $0.14 per share. Investors were also likely pleased to see that the social media company’s adjusted earnings soared 110% from the year-ago period’s $0.10 per share. The third quarter also marked the fourth straight period in which Twitter posted GAAP profitability.
Meanwhile, Twitter’s quarterly revenues jumped roughly 29% from $590 million to $758.1 million. This growth represented the largest quarterly increase since the first quarter of 2016. Plus, Twitter’s top line blew away our $703.6 million estimate.
The Bull Details
Much of the negativity surrounding Twitter going into the report focused on its users. Twitter has reportedly removed millions of accounts, many of which were never reported in their official user figures in the first place, in an effort to clean up its platform from spam accounts and “fake news.”
Twitter’s average daily active user base jumped 9%, which fell short of both the year-ago period 14% growth and Q2’s 11% jump. But nearly 10% DAU growth at a time when investors worried that its user base would take a massive hit is good sign.
With that said, the social media company’s average monthly active users slipped from 330 million in Q3 of 2017 to 326 million. Twitter MAU’s also dropped by 9 million sequentially.
Despite the decline in users, Twitter saw its ad revenues jump 29% from the year-ago period to $650 million. “We’re doing a better job detecting and removing spammy and suspicious accounts at sign-up,” CEO Jack Dorsey said in a company statement.
“This quarter’s strong results prove we can prioritize the long-term health of Twitter while growing the number of people who participate in public conversation.”
Video
Twitter said that video ads accounted for more than half of its total Q2 ad revenue. In the U.S., overall ad revenue popped 32% to reach $348 million. Plus, international ad revenues grew by 26% to $302 million. Maybe more importantly, Twitter’s total ad engagements soared 50% and cost per engagement sunk 14%.
The company’s constant push into live streaming video should help it continue to become more attractive to advertisers. “We are demonstrating Twitter’s unique value proposition for advertisers through innovative ad formats, better relevance and continued improvement in ROI,” Twitter CFO Ned Segal said in a statement. “Advertisers are choosing Twitter to reach the most valuable audience when they are most receptive.”
Twitter, like Facebook , has tried to grab live video deals and pump out streaming content, as the likes of Amazon (AMZN - Free Report) and Netflix (NFLX - Free Report) continue to pull people away from traditional, ad-supported TV.
Twitter currently has deals with Disney’s (DIS - Free Report) ESPN, NBCUniversal (CMCSA - Free Report) , Viacom , Activision Blizzard , and others. The company also offers more live sports, which includes weekly live MLS and MLB games.
Data Licensing
Twitter remains an invaluable source for news outlets and regular users to distribute instant information. This helped Twitter’s other revenue source, its data licensing business, see its revenues jump 25% to $108 million.
Investors should note that some have said that Twitter’s data licensing unit could end up coming under government scrutiny. But it doesn’t seem to be a concern just yet. Twitter’s CEO tried to assure analysts and investors that there is nothing to worry about earlier this year.
“We are different from our peers in that Twitter is public. We serve the public conversations, so all of our data is out in the public, out in the open,” Dorsey said on a Q1 conference call. “And our data business just organizes that public data in real time to make it easier for brands, researchers, and organizations to utilize it.”
Twitter later followed up with a statement on its platform that said: “To be clear - our data licensing business does not sell DMs” (direct messages). Any reports to the contrary are wrong.”
Bottom Line
Twitter has prioritized the health of the platform over user growth, which should theoretically help the firm in the long run.
Twitter is currently a Zacks Rank #1 (Strong Buy) that is expected to see its adjusted fiscal 2018 earnings skyrocket over 59%, based on our current Zacks Consensus Estimate. Plus, Twitter’s full-year revenues are projected to pop by 20%.
Clearly, it seems that Twitter looks ready to become a more profitable company while it grows both its ad revenues and data business on the back of increased user engagement. The bull case simply put is: Advertisers need to reach people somewhere and the decline of linear TV and print media has made them harder to find.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>