Is Twitter A Good Buy Near Its 52-Week Low?TWTR) is on a roll this year. The social media company has been recording rapid growth in its user base, which has led to an improvement in its financial performance at a fast clip. In fact, in Twitter's last reported quarter, the company's revenue shot up to $502 million, an year-over-year increase of 61%. More importantly, the company was able to outperform its own expectations for revenue of $470 million to $485 million.
Additionally, going forward, Twitter forecasts third-quarter revenue to be in $545 million to $560 million range.
An expanding user base is a catalyst
Twitter's growth will be driven by the increasing traction of its chatting and voice calling platforms, which will help the company make progress in monetization. More specifically, the company is focusing on three major verticals -- disciplined execution, ease of use to accelerate value creation, and improve the delivery of its solutions. Focus on these areas will help Twitter acquire more users going forward, especially in mobile.
More importantly, the company's approach seems to be working already, as it reported 15% year-over-year growth in its average Monthly Active Users (MAUs) to 316 million last quarter. The majority of MAU growth was driven by SMS-driven Fast Followers. Without SMS Fast Followers, MAUs for the second quarter would have been 304 million, an increase of 12% year-over-year.
New features will improve user acquisition and advertisements
Looking ahead, Twitter plans to continue improving the features that it offers in order to sustain the impressive rate of growth in its user base. For instance, Twitter recently introduced an autoplay feature for local GIFs, Vines, and videos, coupled with Periscope live video running on Android. These features should play an important role in keeping users hooked on to the Twitter platform and increase engagement.
Now, with an increase in engagement, Twitter will be able to attract more advertisers. As a result, it has released focused campaigns, reports, and common pricing for global advertisers in order to drive improved returns on investments. The company has also launched installed applications, which will allow app advertisers to communicate with their mobile users depending on the type of apps they have installed on their device.
Moreover, by introducing Audience Insights, which is an app that gives advertisers consolidated information such as buying behavior, interests and user demographics, Twitter is improving the service that it offers to advertisers. This will allow the company to increase the advertiser base going forward as it offers better, actionable insights.
Twitter recently entered into a partnership with Google's DoubleClick platform to enhance advertising performance capacity and credit for Twitter express response marketers. Through this partnership, Twitter is will offer its inventory by leveraging the DoubleClick Bid Manager platform. Further, Twitter has introduced its Official Partner Program, which is an innovative effort that integrates major product and service partners that assist businesses in achieving superior results on Twitter.
Additionally, Twitter is also focusing on inorganic growth. The company recently acquired TellApart, which is a marketing technology provider that gives e-commerce advertisers and retailers robust cross-device reaming potential by leveraging email marketing and dynamic product ads. Hence, it is evident that Twitter is making aggressive moves to monetize its fast-growing user base, and this will act as a catalyst for the company in the long run.
Despite reporting growth in its financial performance and user base, Twitter shares have taken a beating on the stock market this year, declining to the tune of 20%. In fact, Twitter now trades close to its 52-week low. But, considering the points discussed above, I think Twitter's drop is a buying opportunity since the company is focusing on two key areas – improving the user base and better monetization techniques. Hence, investors should take a closer look at Twitter since it can get better going forward.
Published on Aug 18, 2015By Harsh Singh Chauhan