Twitter (TWTR) Last Update 8/9/21
Related: EBAY GOOG AMZN AKAM
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
Twitter
STOCK PRICE
DIVISION
% of STOCK PRICE
TOTAL
100%
$77.83
$71.32
Yours
Trefis Price
N/A
$55.60
Market
 
Top Drivers for Period
Key Drivers
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TREFIS Analysis


Trefis Report
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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

Twitter Company

VALUATION HIGHLIGHTS

  1. United States Region constitutes 53% of the Trefis price estimate for Twitter's stock.
  2. International Region constitutes 41% of the Trefis price estimate for Twitter's stock.

WHAT HAS CHANGED?

Latest Earnings

For Q2 2021, Revenue totaled $1.19 billion, an increase of 74% y-o-y. Advertising revenue was $1.05 billion, up by 87% y-o-y. US revenue totaled $653 million, up by 79% y-o-y. International revenue was $537 million, up 69% y-o-y. Net income was $66 million and diluted EPS of $0.08, compared to net income of $-1.4 million and diluted EPS of $-1.75 in the same period of the previous year.

Impact of Coronavirus

IT software and Services industries are suffering from a fall in demand for software and web services as consumers are focusing solely on essentials and not discretionary products. That said, the industry has seen companies with a portfolio of software as well as services aimed at remote collaboration benefit due to the growing number of people globally. Many companies are also operating with employees working remotely from their own home. The company had a strong start to the year in Q1 before the effects of COVID-19 began spreading more broadly, resulting in widespread economic disruption and a significant decrease in global advertising spend March onwards.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below we highlight key drivers of Twitter's value that present opportunities for upside or downside to its current Trefis price estimate.

United States Advertising

  • U.S. Average Daily Active Users: We currently forecast this figure to increase from 35.5 million in 2020 to 55 million by the end of our forecast period.
  • Revenue Per U.S. User: We currently forecast this metric to increase from $58.6 in 2020 to about $86 by the end of our forecast period with a steady growth over the years. Notably, the trend of DAU growth has given way to pricing growth with the company's focus on platform health.

International Advertising

  • International Average Daily Active Users: We currently forecast this figure to increase from 147 million in 2020 to about 227 million by the end of our forecast period.
  • Revenue per International User: We currently forecast this metric to increase from $11.10 in 2020 to $16.15 by the end of our forecast period with a steady growth over the years. We expect monetization growth for the international business to be driven by improvement in platform health.

BUSINESS SUMMARY

Twitter is an online platform for self-expression and real-time conversation. The updates and messages posted by users are termed as 'tweets,' and are limited to 140 characters. This essentially enables a quick exchange of information, while maintaining the conciseness and relevance of the messages. The company had 330 million average monthly active users at the end of 2018.

Twitter earns revenue through advertising and data licensing, with the advertising business accounting for a majority of its revenues. The company charges advertisers and marketers for promoting their tweets and Twitter accounts.

SOURCES OF VALUE

We believe that the United States business is the primary source of value for Twitter because:

Significantly Higher Ad Monetization Compared To International Business

The U.S. accounted for approximately 57% of Twitter's revenues in 2019. Although the international business is growing, the monetization level remains much higher for the U.S.

Revenue per U.S. user stood at $66 for the U.S. in 2019, almost five times the corresponding figure for the international segment. We notice a similar discrepancy for Facebook as well, which is a much more mature and profitable company. As there are structural reasons for this disparity, ad monetization in the U.S. may remain significantly higher for the foreseeable future. The average ad pricing in international markets is lower due to lack of purchasing power. In addition to this, the online advertising is still picking up in many of the emerging markets such as India and Brazil.

KEY TRENDS

Growing Online And Mobile Advertising

The online advertising market is growing, and mobile is going to be the forefront of this growth in the coming years. Google has long dominated this market but Facebook, LinkedIn, and now Twitter, are beginning to tap the opportunity.

Global mobile advertising share in the global online ad market is growing rapidly. This plays right into Twitter's hands as the company earns more than 85% of its revenues from the mobile platform.

Though Ad Engagements Are Rising Rapidly On The Platform, The Cost Per Ad Engagement Is Rising Slowly

We think the company has a long way to go in terms of selling its ad inventory, and this is why the number of ads is growing. Additionally, it appears that currently there is oversupply which explains the decline in the average ad pricing.

Twitter is expanding its sales presence across the globe. In addition, it is also enhancing the reach of its self-service advertising platform (which primarily caters to small and medium-sized businesses) across additional markets and we expect these initiatives to propel sales growth in the coming quarters.

As nationalism continues to impact how communications shape though processes, Twitter is likely to continue becoming an increasing important aspect of news dissemination and consequently shaping opinion. Twitter's ability to mold sentiment is likely to keep the stock an important market constituent.