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Twitter (TWTR) Down 2.5% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Twitter (TWTR - Free Report) . Shares have lost about 2.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Twitter due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Twitter Q4 Earnings Beat, Revenue Outlook Disappoints

Twitter reported fourth-quarter 2018 non-GAAP earnings of 31 cents per share, outpacing the Zacks Consensus Estimate by 6 cents. The figure also soared 63.2% from the year-ago quarter.

Top-Line Details

Revenues of $909 million increased 26% on a constant-currency (cc) basis from the year-ago quarter and comfortably surpassed the consensus mark of $869 million.

U.S. revenues (56% of revenues) increased 24% year over year to $505.6 million. International revenues (44.2% of revenues) increased 27% at cc and on a year-over-year basis to $403.2 million in the reported quarter.  

Japan remained Twitter’s second largest market and accounted for 15% of total revenues that grew 30% to $138 million.

User Base Details

Average mDAU were 126 million in the reported quarter compared with 115 million in the year-ago quarter and 124 million in the previous quarter.

mDau is defined as “Twitter users who logged in or were otherwise authenticated and accessed Twitter on any given day through Twitter.com or Twitter applications that are able to show ads. Average mDAU for a period represents the number of mDAU on each day of such period divided by the number of days for such period.”

Average US mDAU were 27 million compared with 25 million in the year-ago quarter and 26 million in the previous quarter. Moreover, average international mDAU were 99 million compared with 89 million in the year-ago quarter and 98 million in the previous quarter.

Twitter’s average monthly active users (MAUs) totaled 321 million, down from 330 million in the year-ago quarter and 326 million in the previous quarter.

Ad Revenue Details

Advertising revenues increased 26% at cc year over year to $791 million. U.S. advertising revenues totaled $425 million, up 24% in a year. International ad revenues grew 21% to $366 million.

Owned-and-operated advertising revenues surged 26% to $749 million.

Ad engagements increased 33% year over year. Click through rates (CTR) grew on a year-over-year basis across the majority of ad types, as ad prediction models and video ad product performance continue to improve. Cost per ad engagement was down 7%.

Video ads accounted for more than half of ad revenues and remained Twitter’s fastest-growing ad format. Strength was witnessed in Video Website Card, in-stream pre-roll and First View ads in the reported quarter.

Data licensing and other revenues jumped 35% from the year-ago quarter to $117 million. The company stated that data and enterprise solutions (DES) grew on a year-over-year basis. This time, MoPub had its highest revenue quarter ever.

Operating Details

Twitter’s non-GAAP total costs and expenses were $618 million, up 21% on a year-over-year basis. Traffic acquisition costs (TAC) were approximately $17 million, down 13% in a year.

Adjusted EBITDA increased 28.9% to $397 million. Adjusted EBITDA margin expanded 200 basis points (bps) on a year-over-year basis to 44%.

GAAP operating income jumped 88% from the year-ago quarter to $207 million.

Guidance

For first-quarter 2019, Twitter expects first-quarter 2019 total revenues between $715 million and $775 million. GAAP operating income is expected between $5 million and $35 million.

For fiscal 2019, management expects GAAP operating expenses to increase roughly 20% year over year. Capital expenditures are expected between $550 million and $600 million.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -41.33% due to these changes.

VGM Scores

At this time, Twitter has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Twitter has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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