Due to the potential buyout of TWTR by Elon Musk, I think it is important to see how much value is actually behind Twitter to inform decision making for the TWTR holders over the next couple of weeks.
TWTR is undervalued and a solid investment. I'm going to jump into why I believe this to be the case. We are going to look at TWTR's current valuation, recent earnings, and 6 key financial ratios. This is a fairly long analysis but if you're thinking of investing in TWTR then you should have a decent understanding of why you decided to make this investment. Anyway, enough with the intro, let's jump into the analysis.
If you're not familiar with TWTR then here is a quick summary, feel free to jump past this part.
“Twitter, Inc. operates as a platform for public self-expression and conversation in real-time. The company offers Twitter, a platform that allows users to consume, create, distribute, and discover content. It also provides promoted products and services, such as promoted ads and Twitter amplify, follower ads, and Twitter takeover; Tips to directly send small one-time payments on Twitter using various payment methods, including bitcoin; Super Follows, a paid monthly subscription, which includes bonus content, exclusive previews, and perks as a way to support and connect with creators on Twitter; and Ticketed Spaces to support creators on Twitter for their time and effort in hosting, speaking, and moderating the public conversation on Twitter Spaces. In addition, the company offers Twitter Audience platform, an advertising offering that enables advertisers to extend advertising campaigns; Twitter Developer Platform, a platform that enables developers to build tools for people and businesses using its public application programming interface; and paid access to Twitter data for partners with commercial use cases. Twitter, Inc. was founded in 2006 and is based in San Francisco, California.”
I'm usually more of a fundamental investor but I also think there are some technical indicators that help provide additional; content when making an investment, which is why we will look at recent volume.
Comparing TWTR's most recent volume to their average monthly volume can help us derive some valuable insights. Firstly, TWTR's trading volume over the past day is sitting around 76.5M, which is significantly higher than their average monthly trading volume of 44.13M. This can be obviously inked to the fact that Mush has bid to buyout TWTR in full for a premium over the current market price.
This higher recent volume is indicative of traders actively betting on price increases in the TWTR stock and increased enthusiasm around the TWTR stock. If this high relative volume is paired with a break of resistance the upwards price movement is typically more significant.
Understanding the valuation of a stock is a useful check to see if the investment fundamentals are sound. I pulled the valuation and stock rating for a quick view to see if TWTR is considered undervalued or overvalued.
Analysts of TWTR have given an overall rating of 5, on a rating scale between 1 and 5, with 1 being the worst and 5 being the best. This overall rating consists of 3 different ratings, PE, ROE and DCF which I'll get into below.
PE Rating: Currently, analysts have given TWTR a PE rating of 5. This is the highest ranking and implies that the TWTR stock is currently undervalued. The PE rating factors in the trailing, current, and future PE Ratio of the TWTR stock. In the case of TWTR, analysts think that TWTR is undervalued given their P/E ratios, relative to the average P/E ratio of their peers.
ROE Rating: Currently, TWTR has been given an ROE rating of 3 by analysts. This is a very average score, which indicates that TWTR's ROE is in line with the ROE of their peers. TWTR's ROE score of 3 implies that they are generating small profits if any, and there is some room for improvement.
DCF Rating: We have saved the best (and most influential) rating for last. TWTR has been given a score of 5 based on the quality of their DCF model (and projections). The DCF model is very commonly used by investors to value securities and is the de facto measurement of a stocks value. As a result of this, a high level of importance is placed on the company's DCF models. With that being said, TWTR's score of 5 is very good, implying the outlook for TWTR is very positive, and their stock is currently undervalued.
Based on these metrics we can see that TWTR seems to be undervalued and a solid investment. Considering these core metrics look good, I would be likely to take a position in TWTR. That being said, I want to look at some other metrics and factors.
There are 6 main financial ratios that we are going to look at today. These ratios can help us to get a general idea of the financial health of the TWTR stock before we choose to enter into (or add to) a position. These ratios can help us to understand the current state of Twitter, Inc.'s business, as well as what their future might look like.
Overall, I think that the TWTR stock is undervalued. This is due to TWTR overall stock grade being ranked a 5, track record of beating earnings, and the fact that 3/6 key ratios are good (if not great). I think that all of these factors on their own are amazing, however when you look at them together and factor in the fact that their relative volume is higher than their average volume, it creates the perfect storm.
Thanks for taking the time to read my analysis, please follow me for the latest investment insights and leave a comment if you have any questions or disagree with my thoughts - always open to a good discussion!