Twitter (TWTR - Free Report) surges over 16% in trading this morning following their earnings release. Twitter beat EPS estimates by 40%, reporting an adjusted EPS of $0.21 for the quarter compared to the $0.15 estimate. The reported Q1 EPS represents 56% growth YoY. Twitter posted revenues of $787 million exhibiting over 18% growth from the same quarter last year.
Daily active users (DAUs) and lucrative advertising/event deals drive Twitter’s top-line. Their ability to monetize more users at a higher rate is going to dictate this stock’s future performance. For Q1 Twitter reported 133 million monetizable DAUs demonstrating 11% growth from the same quarter last year and 22% growth from Q1 2017.
International daily users are expanding at a much faster rate than users domestically representing 79% of the total daily users today. More than 50% of TWTR’s revenue is being driven within the United States, but as this firm further develops international advertising relationships, this should shift.
Total ad engagements grew 23% year-over-year, and cost per engagement dropped 4%.
Twitter CEO Ned Segal is confident that this company is going to continue to attract lucrative ad deals with their consistently strong performance “demonstrating Twitter’s unique value proposition for advertisers as the best place to launch something new or connect with what’s happening. We’ve never been more confident in our strategy and execution and see a great opportunity to grow our audience and deliver even more value for advertisers.”
Ned Segal and his execs believe that the future growth of the company is going to rely on Twitter’s ability to keep its users safe. Abusive & offensive content has been plaguing social media sites for years and can have real-life impacts on individuals. Twitter is aware of this and is taking every precaution, applying machine learning to protect the safety of users, which has been able to identify 38% of abusive content and quickly remove it.
As of late Twitter has been a platform for people of influence to express themselves to the public in a swift manner. Whether its president Trump tweeting about his wall or Elon Musk making outlandish acquisition claims to boost Tesla’s (TSLA - Free Report) stock. This platform relies on the opinions of influential people for its popularity.
Looking forward Twitter is aiming to shift focus to events, with live updates, recaps, and highlights. With live updates on events, it will allow users to stay perpetually informed.
Twitter is still a small fish in a large pond. Facebook (FB - Free Report) dwarfs TWTR’s DAUs with over 11x their total daily user base. Even Snapchat (SNAP - Free Report) has almost 50% more DAUs than Twitter. Twitter needs to fortify its competitive advantage in this space if it’s going to continue to gain market share.
Twitter is still priced below where it closed on its first day of trading in 2013, but the company has proven its growth model and has been able to demonstrate consistent bottom-line improvements. The future of this firm is going to be determined by user perception. Is Twitter just a platform for rants and fake news or is it a place where people can receive live accurate information that is useful to them?
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