Key Stats for Twitter Inc
The dust has settled, Jack Dorsey's had 18 months in the CEO seat, the predators circled and passed, and the Donald has become the star of the platform ;). But if we look thro' the noise, what's the deal with Twitter stock?
| Ticker | TWTR |
|---|---|
| Sector | Social Media & Networking |
| Latest price | $17.38 |
| Value | $12,425M |
| Daily vol | $232M |
| Date | 13 January 2017 |
Useful Links
- Latest news from Google Finance and Yahoo Finance
- Latest results from SEC Edgar
- Website: https://twitter.com
Description
You know what it is... even if you don't use it!
Twitter gives everyone the power to create and share ideas and information instantly without barriers. Our service is live—live commentary, live connections, live conversations. Whether it is breaking news, entertainment, sports, or everyday topics, hearing about and watching a live event unfold is the fastest way to understand the power of Twitter.
They've four stakeholders: users, advertisers, developers and data-users. Looking at advertisers, who drive the revenue, there are "promoted" tweets / accounts and trends. Data-users also generate revenue, buying access to the Tweet stream!
Recent financials
So the sales growth has been remarkable, and it looked like the business was going to reach critical mass, but, alas... 2016 proved to be the year the growth stopped accelerating. :( with a $2.6bn forecast for 2016 and $2.8bn for 2017.
| Metric | 2015A | 2014A | 2013A | 2012A | 2011A |
|---|---|---|---|---|---|
| Revenue | $2.2bn | $1.4bn | $0.7bn | $0.3bn | $0.1bn |
| EPS | -$0.79 | -$0.96 | -$3.41 | -$0.68 | -$1.60 |
But despite all that growth, the business has never turned a profit on a reported basis. Though that's not scared the company or Wall Street, who prefer to look at "Adjusted Net Income." Which likes to reverse Stock-based compensation expense from the calculation.
I've said it before... these games of ignoring stock compensation are concerning. Sure it may be a non-cash item, it leads to dilution of me the shareholder. That caveat aside, here's the comparison of reported and adjusted Earnings.
| Metric | 2015A | 2014A | 2013A | 2012A | 2011A |
|---|---|---|---|---|---|
| Reported | -$521m | -$578m | -$645m | -$79m | -$128m |
| Adjusted | $558m | $301m | $75m | $21m | -$43m |
Competition
When it comes to competition, they highlight:
Companies that offer products that enable everyone to create and share ideas and other information. These offerings include, for example, Facebook and Google, as well as largely regional social media and messaging companies that have strong positions in particular countries.
Companies that develop applications, particularly mobile applications, that create, syndicate and distribute content across internet properties.
Traditional, online, and mobile businesses that enable marketers to reach their audiences and/or develop tools and systems for managing and optimizing advertising campaigns.
Clearly TWTR doesn't have the scale of the Majors Google/Facebook nor does it have the dominance of Line / Weibo in Japan / China. And even if we look at traditional media players...it's unimpressive too.
| Companies | Latest Sales | Operating Profit | Return on Equity |
|---|---|---|---|
| Twitter Inc | $2,523M | 3% | -9% |
| High Growth | |||
| Alphabet Inc | $85,537M | 33% | 15% |
| Facebook Inc | $24,670M | 52% | 16% |
| salesforce.com, inc. | $7,907M | 8% | 4% |
| Line Corp (ADR) | $1,231M | 9% | N/A |
| Weibo Corp (ADR) | $592M | 20% | 13% |
| Traditional | |||
| Walt Disney Co | $55,632M | 30% | 21% |
| Time Warner Inc | $28,506M | 28% | 19% |
| Comcast Corporation | $78,623M | 33% | 16% |
| Twenty-First Century Fox Inc | $27,755M | 24% | 20% |
| Verizon Communications Inc. | $127,894M | 35% | 83% |
Cash / Debt?
Twitter Inc has $2,010M of net cash. That is the equivalent of 16% of the market value of Twitter Inc. That's nice to see, and gives them the ability to invest in the business, if they need to.
Wall Street thinks?
The professionals on Wall Street have a $16.59 for Twitter Inc and their recommendation to clients is Hold. That implies a downside of -5% to their target.
Valuation
When we talk about 33x earnings, we are really referring to "adjusted earnings", so I feel a little uncomfortable with the comparison.
But giving them the benefit of the doubt, 33x this year, isn't too pricey compared to the majors and a considerable discount to the regional monopolies or the predator, Salesforce.com.
| View Peers | Valuation | Forecast PE | Long-term Growth | Dividend Yield | FCF Yield |
|---|---|---|---|---|---|
| TWTR.K | $12,425M | 33x | 28% | 0% | n/a |
| High Growth | |||||
| GOOGL.O | $563,748M | 24x | 18% | 0% | 4% |
| FB.O | $364,940M | 31x | 35% | 0% | 3% |
| CRM | $52,399M | 77x | 28% | 0% | 1% |
| LN | $7,694M | 55x | 57% | 0% | 1% |
| WB.O | $9,817M | 61x | 83% | 0% | 1% |
| Traditional | |||||
| DIS | $171,130M | 18x | 10% | 1% | 8% |
| TWX | $72,371M | 16x | 12% | 2% | 9% |
| CMCSA.O | $170,896M | 20x | 12% | 2% | 12% |
| FOXA.O | $54,409M | 16x | 13% | 1% | 8% |
| VZ | $214,757M | 14x | 2% | 4% | 18% |
If we switch to Price-to-Sales then it's on 4x sales versus 5x for the other internet companies. In terms of non-internet, Disney's on 3x sales.
Of course, this is only relevant if you think they have the potential to match the margins of the competition long-term.
Dividends
Twitter Inc is not forecast to pay a dividend this year. And frankly, I can't see them paying one anytime soon.
Catalysts
In the last 3 months the stock price has moved by 3% that compares with a change in the earnings forecasts of 4%. That's against a backdrop of sales up 20% in the last 9 months.
On the management team's latest call with Wall Street brokers, the CEO highlighted that
we set a goal of driving towards GAAP profitability in 2017 as we de-prioritize certain initiatives and simplify how we operate. As part of this, we decided to reduce the size of our organization by 9%, mostly concentrated in sales, partnerships, and marketing.
i.e. focusing on cashflow...
Hmmm... sure they need to focus on cashflow, but isn't top-line growth even more important?
The dust has settled, yes. Or maybe TWTR has just settled into the dust. I'm not buying it for the M&A play. And I'm not buying it for top-line growth. So do I buy it as a potential cash machine? For now, I can't see it. Time for an emoji:
:(
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Disclosure: I have no position in any of the stocks mentioned. However I may initiate a position within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Reddit, moderators, and the author do not advise making investment decisions based on discussion in these posts. Analysis is not subject to validation and users take action at their own risk.
Author notes: u/shane_stockflare works at a financial website, Stockflare, and is a Chartered Financial Analyst.
Submitted January 13, 2017 at 12:28PM by shane_stockflare http://ift.tt/2isLSQk
