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Why Is Twitter (TWTR) Up 7.6% Since Last Earnings Report?

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A month has gone by since the last earnings report for Twitter (TWTR - Free Report) . Shares have added about 7.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Twitter 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 Q2 Earnings Up Y/Y, User Growth Aids Revenues

Twitter reported second-quarter 2019 non-GAAP earnings of $1.58 per share, much higher than 17 cents reported in the year-ago quarter.

The earnings figure included non-GAAP benefit from income taxes of $1.08 billion, owing to the establishment of deferred tax assets from intra-entity transfers of intangible assets.

Excluding benefit from deferred tax asset worth $1.08 billion, adjusted earnings were 5 cents compared with 8 cents reported in the year-ago quarter.

Revenues increased 18% year over year to $841.4 million. On a constant-currency (cc) basis, revenues grew 20%.

The Zacks Consensus Estimate for earnings and revenues was pegged at 18 cents and $841 million, respectively.

User Details

Average monetizable daily active users (mDAU) were 139 million in the reported quarter compared with 122 million in the year-ago quarter and 134 million in the previous quarter.

Average U.S. mDAU were 29 million compared with 26 million in the year-ago quarter and 28 million in the previous quarter. Moreover, average international mDAU was 110 million compared with 96 million in the year-ago quarter and 105 million in the previous quarter.

Twitter has been focusing on reducing abuse on its platform. Initiatives, including detection of rule violations and improvement in safety of users, have been prioritized.

CEO Jack Dorsey stated that these efforts resulted in an 18% drop in reports of spammy or suspicious behavior across all Tweet detail pages.

Revenue Details

U.S. revenues (54% of revenues) increased 24% year over year to $455.2 million. International revenues (46% of revenues) were up 12% to $386.2 million. At cc, revenues grew 16%.

Advertising revenues increased 21% to $727.1 million. At cc, advertising revenues grew 23%.

U.S. advertising revenues totaled $378.5 million, up 29% year over year. International ad revenues grew 13% to $348.6 million.

Ad engagements increased 20% year over year. However, cost per ad engagement stayed flat year over year.

Data licensing and other revenues increased 4% from the year-ago quarter to $114.3 million.

Twitter’s total costs and expenses were $766 million, up 21% on a year-over-year basis.

Adjusted EBITDA increased 7.9% to $285.7 million. GAAP operating income increased 4.9% from the year-ago quarter to $75.7 million.

Guidance

For third-quarter 2019, total revenues are expected between $815 million and $875 million. Moreover, operating income is expected between $45 million and $80 million.

For fiscal 2019, management expects GAAP operating expenses to increase roughly 20% year over year.

Capital expenditures are still expected between $550 million and $600 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted 5% due to these changes.

VGM Scores

At this time, Twitter has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, 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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