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Twitter Inc TWTR

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Twitter Reported Strong Q2 As Ad Product Mix Is Improving; Raising FVE to $58; Shares Overvalued

Ali Mogharabi Senior Equity Analyst

Analyst Note

| Ali Mogharabi |

Twitter reported excellent second-quarter results that exceeded our expectations and the FactSet consensus estimates. User growth combined with higher demand for brand advertising due to the current economic recovery, and the firm’s product enhancements and additional features which attracted more direct response advertisers, drove impressive top-line growth. We adjusted our projections higher as we believe such a mix of ad offerings will increase Twitter’s ad clients and their spending. In addition, some of the firm’s latest non-ad offerings could gain traction in the long run and slightly reduce dependence on advertising, while contributing a bit to revenue growth. Our higher projections resulted in a $58 fair value estimate, up from $52. We recommend new investors to wait for a margin of safety before investing in Twitter as the stock increased 6% in after-hours, trading at 1.27 times our fair value estimate, and 10 times and 35 times our 2021 sales and adjusted EBITDA projections, respectively.

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Company Profile

Business Description

Twitter is an open distribution platform for and a conversational platform around short-form text (a maximum of 280 characters), image, and video content. Its users can create different social networks based on their interests, thereby creating an interest graph. Many prominent celebrities and public figures have Twitter accounts. Twitter generates revenue from advertising (90%) and licensing the user data that it compiles (10%).

Contact
1355 Market Street, Suite 900
San Francisco, CA, 94103
T +1 415 222-9670
Sector Communication Services
Industry Internet Content & Information
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2020
Stock Type Speculative Growth
Employees 5,500

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