Bet Big on Twitter

Twitter (TWTR) has been reporting continued year-over-year expansion in both its top and bottom lines primarily driven by a healthy 3% year-over-year growth in average monthly active users (MAUs) to 310 million during the first quarter of 2016 as against 302 million MAUs in first quarter of 2015 and up 1.6 percent sequentially from 305 million in the fourth quarter of 2015.

Twitter significantly gained from over 34% year-over-year data licensing and other revenue expansion and over 37% year-over-year growth witnessed in advertising.
The geographic-wise advertising revenue for the quarter worldwide grew by over 37% year-over-year to $531 million from $388 million in first quarter of 2015. Further, the international revenue for the quarter grew over 38% year-over-year to $188 million in first quarter of 2016 and advertising revenue for the US grew over 36% year-over-year from $252 million in first quarter of 2015 to $343 million in first quarter of 2016.

The year-over-year adjusted EBITDA for the quarter grew over 73 percent from $104 million in first quarter of 2015 to $180 million during the first quarter of 2016 mainly driven by impressive year-over-year expansion in the number of monthly active users and superior customer traction for the company’s innovative set of online networking services.

The year-over-year top and bottom line growths for Twitter signifies healthy customer traction for the company’s advanced networking services which is believed to continue to deliver sustainable long-term company growth while offering attractive shareholder returns.

Growing in the right areas

The international monthly active users (MAUs) for Twitter grew over 4 percent year-over-year to 245 million users from 236 million users in first quarter of 2015 and increased somewhat sequentially from 241 million users in fourth quarter of 2015. However, MAUs for the US remained the same sequentially and year-over-year at 65 million users. Thus, consolidated MAUs grew over 3 percent globally and year-over-year to 310 million in first quarter of 2016 compared to 302 million MAUs in first quarter of 2015.

Twitter’s year-over-year ad engagement grew 208% for first quarter of 2016 but, cost per ad engagement for the period declined 56% year-over-year in 2016 first quarter which in combination signifies a fall in top line growth from ad engagements.

Twitter witnessed strengthening user engagement including, retweets, replies and likes primarily driven by certain major product introductions that includes, the strategic Twitter-Periscope integration and key timeline improvements. The online networking company is consistently keen on superior and well-disciplined program execution for driving excellent and sustained audience expansion with time.

The consistently increasing active user base coupled with expanding company’s key partnership with other technology giants is believed to drive sustainable long-term company growth while delivering attractive shareholder returns.

Conclusion

Overall, the investors are advised to “Hold” their position in Twitter, Inc. considering the company’s healthy long-term growth prospects being supported by solid total cash position of $3.58 billion against weaker total debt position of $1.6 billion. The PEG ratio of 0.72 signifies weaker company growth. The profit margin of -18.44% indicates no profit but loss.
Published on Jul 21, 2016
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

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