Twitter, Inc.

TWTR Details

Twitter, Inc. (NYSE: TWTR) is a chat platform and an open distribution network for short-form text, image, and video content. Users can create numerous social networks based on their shared interests, resulting in an interest graph. The great majority of the company's revenue comes from selling advertising services. TWTR also makes money by licensing its data and providing mobile ad exchange services to other companies.

Latest News:

• Minority Investment: On January 11, 2022, TWTR's has made a minority investment in Aleph Group, Inc, its exclusive advertising partner. Investments are intended to support the company's educational initiatives worldwide, including the development of a proprietary educational technology platform, digital advertising education, training, and certification for over 50,000 digital professionals in 90 countries across five continents, and efforts to create new digital jobs in underserved markets.
• Sale of MoPub Business: On January 3, 2022, TWTR stated that it had finalized an all-cash sale of its MoPub business for USD 1.05 billion to AppLovin Corporation, a leading marketing software company. The MoPub platform, which includes network mediation, Advanced Bidding, and Marketplace, will be closed down on March 31, 2022.

Q3FY21 Results:

• Double Digit Growth in Revenues: TWTR reported YoY growth of 37.13% in revenues to USD 1.28 billion in Q3FY21 (ended September 30, 2021) from USD 0.94 billion in Q3FY20, attributable to revenue product improvements, strong sales execution, and overall growth in advertiser demand.
• Reported 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.
• Cash and Debt Position: As of September 30, 2021, the company had cash and cash equivalents (including short-term investments) of USD 7.41 billion and total debt of USD 4.25 billion.
• Improvement 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:

• Dependence on Third Parties: It relies on third-party cloud computing services for several aspects of its business and operations, and any disruption or interference with those services could harm its operations.
• Open Source Risk: The company's products and services employ open-source software, and it will continue to do so 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: As of Q3FY21, TWTR expects its Q4FY21 revenues to be in the range of USD 1.5-1.6 billion, together with GAAP operating income of USD 130 – 180 million. Capital expenditures are anticipated to range between USD 85 and 135 million, with stock-based compensation costing ~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 52.29% in the past six months and made a new 52 week low as on January 24, 2022. However, the 14-day RSI Index is hovering in an oversold zone at 17.09, indicating a potential recovery from the current trading level. Further, we have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 38.78.

Considering the significant 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 current price of USD 32.77, down 5.89%, as of January 24, 2022, 12:50 PM ET.

* 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.

 Sonos, Inc.

SONO Details

Sonos, Inc. (NASDAQ: SONO) is a company that sells home audio systems. The firm's product line includes speaker sets and various accessories such as boost, mounts, stands, cables, and networking. The corporation has operations in the Americas, Europe, the Middle East & Africa, and the Asia Pacific. The Americas account for the majority of its revenue.

Latest News:

• Appointments in Leadership Team: SONO named two crucial new members of its leadership team on December 8, 2021. Shamayne Braman has been appointed as the company's new Chief Diversity, Equity, and Inclusion Officer, while Rebecca Zavin has been appointed as Senior Vice President, Software.
• Carbon Reduction Goals: SONO launched its first Climate Action Plan (CAP) on December 8, 2021, as the foundation of its commitment to a more sustainable future. By putting the plan into action, SONO's value chain will be carbon neutral by 2030 and net-zero by 2040.

FY21 Results:

• Boost in Revenues: SONO reported a 29.44% growth in revenue to USD 1.72 billion in FY21 (ended October 02, 2021), up from USD 1.33 billion in FY20 (ended October 03, 2020), due to overall solid demand across all product categories and the success of new product launches.
• Rise in Bottomline: The company earned USD 158.60 million in net income in FY21, compared to a net loss of USD 20.12 million in FY20.
• Healthy Balance Sheet: As of October 02, 2021, the company had cash and cash equivalents of USD 640.10 million and no outstanding debt.

Key Risks:

• Seasonality Risk: Due to heightened consumer spending patterns over the holiday season, its revenue has historically been much more significant in its first fiscal quarter. Any shortfalls in planned first-quarter sales owing to macroeconomic conditions, product release patterns, supply chain interruptions, or other reasons might adversely harm its annual operating results.

Outlook:

• FY22 Estimates: As of November 17, 2021, SONO expect its FY22 revenues to range between USD 1.925 to 2.0 billion, representing a YoY growth of 12-16%. It further estimated its adjusted EBITDA margin to range between 14.5-16.2% and gross margin to be around 46%-47%, including a net tariff impact.

Valuation Methodology: Price/Cash Flow Per Share Based Relative Valuation

 (Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

SONO Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

SONO's stock price has fallen 27.86% in the past month and made a new 52-week low today. The stock is currently trading far below its 50 and 200 DMA levels, and its RSI Index is at 18.73, 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 26.80.

Considering the correction in the stock price, encouraging outlook, long sustainability goals, growth in fundamentals, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the current price of USD 21.58, down 6.30% as of January 24, 2022, 12:38 PM ET.

* 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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.