Analyst Note
| Ali Mogharabi |Twitter reported mixed second-quarter results, as weak revenue was accompanied by better-than-expected user growth and operating losses. While the current pandemic, the economic downturn, and the lockdowns and quarantines have helped platforms such as Twitter grow their user base, lower ad spending has weakened user monetization, which we think will continue throughout the remainder of 2020. Delays in adding headcount due to the current environment helped on the bottom line, but management expects double-digit year-over-year operating expenses growth in the third quarter, which we think will outpace the top line and result in further losses. We continue to expect Twitter to lag its peers such as Facebook in attracting direct response ad dollars, which are in higher demand. However, due to strong user growth we have raised our projections slightly, resulting in a $33 fair value estimate (from the previous $32). We continue to view the no-moat stock as fairly valued.