It has been about a month since the last earnings report for Twitter, Inc. (TWTR - Free Report) . Shares have added about 12.3% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is TWTR due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Twitter reported first-quarter 2018 non-GAAP earnings per share of 16 cents, which beat the Zacks Consensus Estimate of 12 cents. The figure also came in much higher than the year-ago quarter’s figure of 7 cents.
Revenues of $665 million increased 21% from the year-ago quarter and beat the consensus mark of $609.3 million. But quarterly gains were 27% after excluding around $23 million impact of the winding down of its TellApart business. However, on a sequential basis, revenues declined 9%.
In first-quarter 2018, Twitter’s adjusted monthly average users (MAUs) totaled 336 million, up 3% on a year-over-year basis and 1.8% sequentially.
U.S. MAUs of 69 million increased 1 million sequentially but remained flat on a year-over-year basis. International MAUs of 267 million increased by 10 million from the year-ago quarter and 5 million from the previous quarter.
Daily average users (DAUs) were up 10% year over year, driven by double-digit growth in five out of top 10 global markets. However, DAU growth compared unfavorably with 12% growth recorded in fourth quarter and 14% in third quarter of 2017.
Quarterly Numbers in Details
Advertising revenues increased 21% year over year to $575 million. Owned-and-operated advertising revenues increased 28% year over year to $533 million.
Ad engagements increased 69% year over year. Cost per ad engagement was down 28%, given the shift to auto-play video, which has lower cost-per-view compared to click-to-play.
Video ads continued to be the key driver backed by strength in Video Website Cards, Video App Cards, In-Stream pre-roll and mid-roll ads. Live streaming also resulted in an increase in tweet impressions. The company streamed 1,300 live events last quarter and secured 30 new live partnerships.
Data licensing and other revenues increased 20% to $90 million, driven by data and enterprise solutions (DES) and mobile ad exchange platform, MoPub.
U.S. revenues (52.1% of total revenues) increased 2% year over year to $347 million, Advertising revenues from the United States totaled $287 million.
International revenues (47.8%) increased 53% year over year to $318 million in the reported quarter. International ad revenues increased 28% year over year to $287 million on the back of strong growth in the Asia Pacific region. Management attributed this to video growth in Japan and performance of ad products in China export market.
Notably, Japan, the second largest revenue generator, grew 61% year over year and contributed 18% of total revenues.
Twitter incurred non-GAAP expenses of $513 million, which increased 10% on a year-over-year basis.
The company reported GAAP net income of $91 million against loss of $61.6 million reported in the year-ago quarter.
Twitter’s adjusted EBITDA rose 43.5% to $244 million. Adjusted EBITDA margin expanded 600 basis points (bps) year over year to 37%. The figure surpassed the company’s EBITDA margin target range of 33-34%.
Balance Sheet & Cash Flow
As of Mar 31, 2018, cash and cash equivalents (short-term investments) were 4.5 billion compared with $4.4 billion at the end of Dec 31, 2017. For the quarter, cash flow from operations was $242.7 million and adjusted free cash flow was $135.3 million.
For the current quarter, adjusted EBITDA is expected to be in the range of $245–$265 million while EBITDA margin is likely to be in a band of 37–38%.
For fiscal 2018, Twitter expects capital expenditures to be in the range of $375-$450 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been 11 revisions higher for the current quarter.
At this time, TWTR has a strong Growth Score of A, though it is lagging a bit on the momentum front with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% 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.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise TWTR has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.