Has Twitter action peaked?

[Updated 09/08/2024] Twitter update

At its current price of $ 65, Twitter actions has a moderate upside potential according to Trefis Evaluation of $ 71. The stock has risen nearly 20% since late 2020 as the company continues to show growth in revenue and operating margin. In the second quarter of 2021, revenue reached $ 1.19 billion, up 74% year-on-year. Growth was driven by ad revenue which totaled $ 1.05 billion, up 87% year-on-year, with total ad engagements increasing 32% year-on-year and cost per engagement 42% year-on-year. year-over-year for the quarter. At the same time, the operating margin improved to 2.5% for the quarter compared to -40% in the same quarter of the previous year. In addition, the company reported $ 772 million in cash inflows from operating activities for the first six months. We believe the stock has moderate upside potential in the near term after the recent rally.

We are waiting Twitter revenue to reach $ 4.8 billion in 2021, while profits are expected to reach $ 0.59 for 2021. In fiscal 2022, we expect revenue to rise further to $ 5.3 billion. Additionally, the EPS figure will likely be $ 0.69, which together with the P / E multiple of around 105x will lead to Twitter rating of $ 71, an increase of approximately 8.5% from the current market price.

[Updated 01/14/2021] Is Twitter’s stock movement being exaggerated?

Growth of 47% since the end of 2019, Twitter actions seems to be overvalued at the current price. TWTR’s stock has gone from $ 32 at the end of 2019 to $ 47 now, compared to the S&P 500 which has gained 17% since late 2019. The company has seen strong revenue growth in recent years and its P / S multiple remained stable between 2017 and 2019. We believe the stock, after the recent rally, is overvalued.

During the Covid-19 crisis, Twitter saw its turnover remain stable over the first 3 quarters of 2020, while profits fell, despite the increase in their daily audience. In the third quarter of 2020, Twitter recovered slightly as revenue was recorded at $ 936 million, up 14% year-on-year, and profits were recorded at $ 0.04 from $ 0.05 at the same period of the previous year. In addition, the company reported $ 660 million in cash inflows from operating activities for the first nine months. Despite the drastic drop in profits and the lack of revenue growth in the first 3 quarters, Twitter shares have skyrocketed, leading us to the conclusion that it is now on the verge of falling.

We expect Twitter’s revenue to remain stable at $ 3.5 billion for 2020. In addition, its net income is expected to drop to $ 0.4 billion, which will bring its EPS to $ 0.54 in 2020. By the Further, revenue is expected to rise further to $ 3.8 billion in 2021. Additionally, the EPS figure will likely be stable at $ 0.55, which, together with the P / E multiple of around 80x, will result in Twitter’s valuation of around $ 44, about 7% down from the current market price.

[Updated 06/25/2020] Has Twitter action peaked?

After a 30% rebound from March 23, we believe Twitter actions has no room for growth depending on its valuation. Despite the rally, Twitter stock has underperformed the S&P 500 Index over the past three months, with the latter gaining 40%. The recovery was first seen after the Fed’s multibillion-dollar stimulus package, which removed short-term survival anxiety. One of the main reasons the action has risen further is that the company’s user base is growing, as users can find real-time news and discuss current developments on the platform. In the first quarter of 2020, the company saw the average number of monetizable daily active users increase 24% year-over-year.

The company has seen its revenues increase steadily in recent years, but its multiple P / S has remained almost stable. We believe that the stock does not have much room for improvement after the recent rally and the potential weakness of a recession caused by the Covid epidemic.

Part of that increase over the past two years was aided by Twitter’s 42% increase in revenue from 2017 to 2019, while its profit rose from - $ 108 million in 2017 to $ 1.5 billion. dollars in 2019.

Twitter’s P / S multiple was stable at 7x from 2017 to 2019 and is at the same level currently.

Coronavirus effect

The global spread of the coronavirus has resulted in lockdowns in various cities around the world, affecting industrial and economic activity. Due to door-to-door orders, the use of the social media platform increased, with Twitter seeing the average number of monetizable daily active users increase by 24% year-on-year in the first quarter of 2020. However, the revenue growth slowed in the first quarter of 2020 as companies suspended advertising spending due to coronavirus uncertainty. We believe Twitter’s second quarter results will see a big impact on the frontline of this trend which will persist for most of the quarter.

The actual recovery and its timing depend on the wider containment of the spread of the coronavirus. Our dashboard Trends in Covid-19 cases in the United States provides insight into the spread of the pandemic in the United States and contrasts with trends in Brazil and Russia. With investors focusing their attention on the 2021 results, valuations become important in finding value.

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