Twitter, Inc.
TWTR Details
Twitter, Inc. (NYSE: TWTR) is an open distribution network for short-form text, image, and video material, as well as a chat platform. Its members can form various social networks based on their shared interests, resulting in an interest graph. The sale of advertising services accounts for the vast majority of the company's revenue. TWTR also makes money by licensing its data to other companies and offering mobile ad exchange services. As of January 05, 2022, the company's market capitalization stood at USD 32.66 billion.
Latest News:
- Divestiture of MoPub Business: TWTR announced on January 03, 2022, that it had completed the all-cash sale of its MoPub business to AppLovin Corporation, a leading marketing software company, for USD 1.05 billion on January 1, 2022. On March 31, 2022, the MoPub platform, which includes network mediation, Advanced Bidding, and Marketplace, will be decommissioned.
Q3FY21 Results:
- Rise in Revenues: TWTR reported an increase of 37.13% in revenues to USD 1.28 billion in Q3FY21 (ended September 30, 2021) compared to USD 0.94 billion in Q3FY20, due to revenue product improvements, strong sales execution, and an overall increase in advertiser demand.
- Incurred Losses: TWTR incurred net losses of USD 536.76 million in Q3FY21, vs. a net income of USD 28.66 million in Q3FY20, due to litigation settlements.
- Healthy Balance Sheet: The company had USD 7.41 billion in cash and cash equivalents (including short-term investments) as of September 30, 2021, and USD 4.25 billion in total debt.
- Growth in mDAU: In Q3FY21, TWTR reported a Monetizable Daily Active Usage (mDAU) of USD 211 million, up from USD 187 million in Q3FY20.
Key Risks:
- Reliance on Third Parties: It uses third-party cloud computing services for certain aspects of its business and operations, and any disruption or interference with that use could harm its business and operations.
- Open Source Risk: Open-source software is used in the company's products and services, and it will continue to be used in the future. The risk associated with open source licensing requirements is that open-source software may represent more hazards than third-party commercial software because open source licensors often do not give warranties or controls on software provenance.
Outlook:
- Q4FY21 Estimates: TWTR indicated on October 26, 2021, that it expects Q4FY21 revenues to be in the range of USD 1.5-1.6 billion, with GAAP operating income of between USD 130 and 180 million. Capital expenditures to range between USD 85 and 135 million, with stock-based compensation costing roughly USD 175 million.
Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation
(Analysis by Kalkine Group)
* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
TWTR Daily Technical Chart (Source: REFINITIV)
Stock Recommendation:
TWTR's share price has fallen 42.54% in the past six months and made a new 52 week low today. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 28.55, indicating an oversold zone. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 48.00.
Considering the correction in the stock price in the past six months, healthy balance sheet, growth in monetizing metrics, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 39.50, down 3.30%, as of January 05, 2022.
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.
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