Twitter Stock Gains Post Earnings Beat!
27 July 2021 - 7:47PM
Finscreener.org
Shares of social-media platform Twitter (NYSE: TWTR) have
gained close to 4% in early market trading on July 23. Twitter
released its second-quarter results on Thursday after the market
close and reported revenue of $1.19 billion with adjusted earnings
per share of $0.20. In the prior-year quarter, Twitter reported
sales of $683 million and an adjusted loss per share of $1.39. Wall
Street had forecast Twitter to report sales of $1.06 billion and
earnings of $0.07 per share in the second quarter of 2021.
Key performance metrics for Twitter in Q2
Twitter generates a substantial portion of revenue from ad sales
which grew 87% year over year in Q2. Comparatively, its data
licensing and other revenue surged 13% in the June quarter of
2021.
Twitter’s average monetizable daily active users stood at 206
million in Q2, compared to 186 million in the year-ago period and
199 million at the end of Q1. This growth has been attributed to
ongoing product improvements as well as the global conversation
surrounding world events.
Twitter CFO Ned Segal claimed, “We delivered
better-than-expected performance across all major products and
geographies while growing our audience. We continued to make
significant progress on our direct response and brand products with
updated ad formats, improved measurement, and better prediction. We
are driving more value for advertisers with our strong push into
performance-based advertising and expanded offerings for small and
medium-sized businesses.”
In the third quarter of 2021, Twitter expects sales between
$1.22 billion and $1.3 billion, which suggests a year-over-year
growth of 62% at the midpoint guidance. Wall Street on the other
hand has forecast
sales to grow by 51% to $1.17 billion in the June quarter.
What next for TWTR stock?
Twitter needs to generate meaningful earnings consistently to
regain investor confidence. In 2020, the company reported an
adjusted loss of $0.87 per share. Its forecast to improve earnings
to $0.79 per share in 2021 and to $1.08 per share in 2022.
Despite its swinging bottom-line, Twitter’s stock has gained
280% in the last five years, easily surpassing S&P
500 gains of 120%. Twitter is currently valued at a market cap
of $57.66 billion which means itU+02019s trading at a forward price
to sales multiple of 9x and a price to earnings multiple of 67
which is extremely steep.
However, Twitter expects to increase sales to $7.5 billion in
2023, more than twice the company’s sales of $3.72 billion in 2020.
The company’s top-line growth is all set to accelerate in 2021
after it grew by 24.5% in 2018, 13.7% in 2019, and just 7.4% in
2020.
Twitter blue subscription service
One key revenue driver for Twitter will be the launch of recent
subscription services such as Twitter Blue. This service will
initially be launched in Australia for $2.36 and in Canada for
$2.89 per month. Here, users will get additional services such as
bookmarking folders where tweets can be saved or even organized as
part of a virtual library.
It also features an undo button that can be set up until 30
seconds after a tweet is sent for publication on a user’s timeline.
Further, it introduced a reader mode feature where the user can
assemble long threads into a single text. In addition, Twitter Blue
subscribers will get access to customizable icons and themes.
Twitter has confirmed it will continue to spend heavily on
product development to increase user engagement which will
eventually drive monetization higher and lead to strong growth in
top line.
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