Twitter $TWTR, after a recent fall, is it a buy?

Overview of Twitter, Inc. Twitter, Inc (TWTR) is a global platform for public self-expression and conversation in real-time. It's a social networking service allows users to post and interact with messages known as "tweets." Many organizations use Twitter as a marketing tool for businesses and live events. This includes sports, breaking news, and entertainment. In addition, the company offers MoPub, a mobile-focused advertising exchange that combines ad serving, ad network mediation, and a real-time bidding exchange into one monetization platform; Twitter Audience platform, an advertising offering that enables advertisers to extend advertising campaigns; Developer and Enterprise solutions, a software-as-a-service platform that enables developers to build products on Twitter; and paid enterprise access for its public data streams. Twitter, Inc. was founded in 2006 and is headquartered in San Francisco, California. Recent TWTR stock history Twitter stock is down from more than $60/share in October to now $43/share. Right now, the stock is trading near its 52-week low share price.  It has lost more than 25% since October and almost 50% from the mid-February peak. So, why did the stock fall recently? In October, Twitter reported Q-3 results with a 54-cent loss which missed the analysts’ expectations of 15-cents in profit. That loss was mainly due to a one-time litigation charge of $766 million to settle a class-action lawsuit, which was initially filed in 2016 by investors who accused the company of using misleading engagement metrics. On top of that, co-founder and CEO Jack Dorsey resigned as a CEO "effective immediately" on Nov-29-2021. Jack Dorsey was with the company since 2006. Positive outlook for Twitter stock price Parag Agrawal, who has been with Twitter for more than a decade and served as chief technology officer since 2017 replaced Jack as a new CEO. This helped company to get its own CEO as former CEO Jack was serving both Twitter and Block, Inc. (formerly known as Square, Inc.) as a CEO. Jack Dorsey also endorsed the new CEO, making a comment "My trust in Parag as Twitter's CEO is deep. His work over the past 10 years has been transformational. I'm deeply grateful for his skill, heart, and soul. It's his time to lead." If we look at the positive side of the Q-3 results, Revenue jumped 37% from the year-ago period to $1.28 billion, matching estimates. Twitter's ad revenues totaled $1.14 billion, which accounted for 89% of its top line, jumped 41% year over year, experienced a 6% increase in ad engagements, and only saw a "modest" impact from Apple's privacy update for data-tracking apps on iOS. Twitter's monetizable daily active users (mDAUs) increased 13% year over year to 211 million during the third quarter. Twitter said there are no changes to the company's previously shared outlook for the fourth quarter and full-year 2021, or its 2022 goals. The company also said that it won't change its goal of generating more than $7.5 billion in annual revenue by 2023 which is a 50% increase in revenue from the 2021 revenue guidance of $5B.   Right now, the company is focusing on monetizing its platform. From the Q-3 results, it is evident that the company’s updated technology for serving ads and promoting mobile-phone apps has worked well. The company has also set ambitious goals to increase its user count by 20% a year, to reach 315 million mDAU, by 2023. Twitter Valuation and future growth Currently, Twitter trades at around $35B valuation, it grew revenue from $2.443B in 2017 to $4.779B in TTM (Trailing Twelve Months). That is about 19.5% growth per year. If we assume that Twitter can grow 15% for the next 5 years, then Twitter would be making about $10B in revenue by 2026. Before Covid-19 the company was net income positive so it is safe to assume once the situation normalizes the company will be profitable again. In 2018, and 2019 the company generated 39.6% and 42.35% of revenue in net profit respectively. If we take a conservative number say company could make 30% of revenue in net profit by 2026, then that would make $3B in net profit by 2026. If we assume a 20 P/E ratio on the stock (most of the company’s competitors such as Pinterest and Snapchat command more than 30 P/E) then that would make the company value about 20x $3B= $60B. This is a 71% upside in 5 years or an 11% average return for 5 years. If we use analysts’ expectations to count the valuation: The company is expected to grow earnings by 80% in the next 5 years. TWTR is expected to make $0.19 in the EPS (Earnings per Share) for the current year. So, after 5 years- in 2026, the company would be making $3.59 in EPS. Now if we assume 20P/E on the TWTR, the stock would be trading at $71.8/share. Currently, the stock trades around $43.3/share so that is a 65.8% upside from the current price in the next 5 years. That is a 10.5% average return for 5 years. From any of the above methods, it is safe to assume that TWTR will produce at least a 10% per year return for the next 5 years. To conclude, with the new CEO at the helm, in short term the guidance can be lowered, and the stock can fall more but the long-term opportunity is great. At present, Twitter is just a $35B company so it has a lot of room to run from here. Note- All the numbers and ratios are taken from Yahoo Finance. This is not financial advice. It is just a personal opinion so please do your own research before making an investment decision.

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Twitter $TWTR, after a recent fall, is it a buy?

bullish

Overview of Twitter, Inc.

Twitter, Inc (TWTR) is a global platform for public self-expression and conversation in real-time. It's a social networking service allows users to post and interact with messages known as "tweets." Many organizations use Twitter as a marketing tool for businesses and live events. This includes sports, breaking news, and entertainment. In addition, the company offers MoPub, a mobile-focused advertising exchange that combines ad serving, ad network mediation, and a real-time bidding exchange into one monetization platform; Twitter Audience platform, an advertising offering that enables advertisers to extend advertising campaigns; Developer and Enterprise solutions, a software-as-a-service platform that enables developers to build products on Twitter; and paid enterprise access for its public data streams. Twitter, Inc. was founded in 2006 and is headquartered in San Francisco, California.

Recent TWTR stock history

Twitter stock is down from more than $60/share in October to now $43/share. Right now, the stock is trading near its 52-week low share price. It has lost more than 25% since October and almost 50% from the mid-February peak.

So, why did the stock fall recently? In October, Twitter reported Q-3 results with a 54-cent loss which missed the analysts' expectations of 15-cents in profit. That loss was mainly due to a one-time litigation charge of $766 million to settle a class-action lawsuit, which was initially filed in 2016 by investors who accused the company of using misleading engagement metrics.

On top of that, co-founder and CEO Jack Dorsey resigned as a CEO "effective immediately" on Nov-29-2021. Jack Dorsey was with the company since 2006.

Positive outlook for Twitter stock price

Parag Agrawal, who has been with Twitter for more than a decade and served as chief technology officer since 2017 replaced Jack as a new CEO. This helped company to get its own CEO as former CEO Jack was serving both Twitter and Block, Inc. (formerly known as Square, Inc.) as a CEO. Jack Dorsey also endorsed the new CEO, making a comment "My trust in Parag as Twitter's CEO is deep. His work over the past 10 years has been transformational. I'm deeply grateful for his skill, heart, and soul. It's his time to lead."

If we look at the positive side of the Q-3 results, Revenue jumped 37% from the year-ago period to $1.28 billion, matching estimates. Twitter's ad revenues totaled $1.14 billion, which accounted for 89% of its top line, jumped 41% year over year, experienced a 6% increase in ad engagements, and only saw a "modest" impact from Apple's privacy update for data-tracking apps on iOS. Twitter's monetizable daily active users (mDAUs) increased 13% year over year to 211 million during the third quarter.

Twitter said there are no changes to the company's previously shared outlook for the fourth quarter and full-year 2021, or its 2022 goals. The company also said that it won't change its goal of generating more than $7.5 billion in annual revenue by 2023 which is a 50% increase in revenue from the 2021 revenue guidance of $5B.

Right now, the company is focusing on monetizing its platform. From the Q-3 results, it is evident that the company's updated technology for serving ads and promoting mobile-phone apps has worked well. The company has also set ambitious goals to increase its user count by 20% a year, to reach 315 million mDAU, by 2023.

Twitter Valuation and future growth

Currently, Twitter trades at around $35B valuation, it grew revenue from $2.443B in 2017 to $4.779B in TTM (Trailing Twelve Months). That is about 19.5% growth per year. If we assume that Twitter can grow 15% for the next 5 years, then Twitter would be making about $10B in revenue by 2026. Before Covid-19 the company was net income positive so it is safe to assume once the situation normalizes the company will be profitable again. In 2018, and 2019 the company generated 39.6% and 42.35% of revenue in net profit respectively. If we take a conservative number say company could make 30% of revenue in net profit by 2026, then that would make $3B in net profit by 2026. If we assume a 20 P/E ratio on the stock (most of the company's competitors such as Pinterest and Snapchat command more than 30 P/E) then that would make the company value about 20x $3B= $60B. This is a 71% upside in 5 years or an 11% average return for 5 years.

If we use analysts' expectations to count the valuation:

The company is expected to grow earnings by 80% in the next 5 years. TWTR is expected to make $0.19 in the EPS (Earnings per Share) for the current year. So, after 5 years- in 2026, the company would be making $3.59 in EPS. Now if we assume 20P/E on the TWTR, the stock would be trading at $71.8/share. Currently, the stock trades around $43.3/share so that is a 65.8% upside from the current price in the next 5 years. That is a 10.5% average return for 5 years.

From any of the above methods, it is safe to assume that TWTR will produce at least a 10% per year return for the next 5 years.

To conclude, with the new CEO at the helm, in short term the guidance can be lowered, and the stock can fall more but the long-term opportunity is great. At present, Twitter is just a $35B company so it has a lot of room to run from here.

Note- All the numbers and ratios are taken from Yahoo Finance.

This is not financial advice. It is just a personal opinion so please do your own research before making an investment decision.

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3+ Years
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