Twitter’s $7.5 Billion Revenue Goal Achievable by 2023
We raised our fair value estimate to $52, but shares are still overvalued.
We have raised our fair value estimate of Twitter to $52 from $44. The firm used its analyst day to detail how it has carved a path to accelerate top-line growth, which will likely create further operating leverage in the long run. Twitter has taken steps to scale its platforms, enhance its app for consumers and advertisers, improve its direct response ad capabilities, and invest in other user monetization options, all of which accelerated product improvements or launches, drove user growth, and attracted advertisers, which increased user monetization.
Management appeared confident it can increase its daily user count to at least 315 million and grow revenue to at least $7.5 billion in 2023. While we expect strong user growth, we project slightly less users than what the firm is aiming for. However, we are assuming more effective user monetization, driven by the return of brand advertisers, the continuing growth in demand for direct response advertising, and higher ad returns on investment, or ROIs, on the platform, resulting in revenue slightly above the firm’s goal in 2023. We have increased our average annual growth estimate to 23% from 18% over the next five years. We slightly lowered our margin assumptions and now expect an average operating margin of 12% through 2025, versus our previous 15% assumption, as we think the firm will continue to invest aggressively in product innovation.
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