Our recent coverage of the Stake trading platform has prompted a lot of emails from Prophet Community members asking for more coverage of US-listed stocks. So here it is, Should I Buy Twitter Stock (NYSE:TWTR).

About Twitter Stock

Twitter is an American microblogging and social networking service on which users post and interact with messages known as “tweets”. Registered users can post, like, and retweet tweets, but unregistered users can only read them.

Twitter stock closed its first day of trading on the New York Stock Exchange on Nov. 7, 2013, at $44.90 a share. In the years since then, it briefly traded above $70, but more recently, has dipped as low as $30 per share.

Should I Buy Twitter Stock Price

The share price of Twitter is up 91.67% in the past year, with a 52-week range of $35.65 – $80.75 the share is currently trading about 10% lower than the 52-week high. The stock has a market capitalisation of US$55.66billion and is currently profitable with a Price to Earnings ratio of 148.8x.

Should I Buy Twitter Stock
Should I Buy Twitter Stock Price 1-Year

Twitter shares are now only trading 1.09% higher than their IPO high’s in mid-2014 of US$69 per share. This goes to show that investors that are willing to pay massive multiples for potentially higher growth in the future may be left short, when the company doesn’t deliver on the growth or hype.

TWTR Share Price From 2014 to 2021

From the above, you can see that investors who bought at the peak of greed in 2014, have had to wait many years to start realising gains in the share price again.

Should I Buy Twitter Stock: Dividend History

NYSE:TWTR does not currently pay a dividend.

We do not expect the company to be looking to pay a dividend in the near future, and typically of US-listed tech shares may instead focus on growing their ROE internally and giving back to shareholders by increasing the share price.

PLTR:TWTR is very much in the growth phase of its lifecycle and can potentially offer shareholders a higher return on capital by not paying a dividend and re-investing in the company.

Should I Buy Twitter Stock: Investor Sentiment

After surveying 412 Investors about their current PLTR:TWTR shares sentiment: BUY-HOLD-SELL, as well as their target price over the next 12-months here, are the results;

Should I Buy Twitter Stock
Prophet Community Investor Sentiment

The above shows that community members of the private Prophet group are bullish on TWTR shares for the medium to long term.

TWTR Stock Insider Ownership And Trading

Ownership in TWTR is controlled very much by institutions, with individual insiders holding only 2.5%. Founder Jack Dorsey owns USD$1.3billion in stock or 2.23% of the company.

The largest holders in the Twitter stock are Vanguard, Morgan Stanly and BlackRock.

There have been a number of recent insiders transactions in the stock. However, with the majority of insider activity being on the Sell Side.

DateValueNameEntitySharesMax Price
17 May 21SellUS$3,958,110Michael MontanoIndividual75,000US$52.77
03 May 21SellUS$570,567Robert KaidenIndividual10,425US$55.51
09 Feb 21SellUS$411,250Ned SegalIndividual7,000US$58.75
01 Feb 21SellUS$328,009Robert KaidenIndividual6,365US$51.53
25 Nov 20SellUS$3,795,497Omid KordestaniIndividual82,208US$46.76
24 Nov 20SellUS$3,707,796Omid KordestaniIndividual82,209US$45.11
23 Nov 20SellUS$7,383,640Omid KordestaniIndividual164,417US$45.30
Recent Insider Transactions for TWTR Shares

Whilst it’s usually never a great time to see company insiders fleeing for the door, the share price of Twitter over the past year might have some of the executives thinking they should have held onto the stock a little longer.

Arkk Invest also has a significant holding in TWTR Stock at 0.98% of the company.

Should I Buy Twitter Stock: Fundamentals

Twitter trades on a market capitalisation of US$55billion and is currently a profitable company trading on a price to earnings ratio of 148.4x.

Market CapUS$55.66billion
Shares Issued798million
PE148.4x
EPS$0.47
Dividend YieldN/A (does not pay a dividend)
Average Volume16.3million
Debt / Equity67.4%
Revenue4.451billion TTM
ROE5%
DebtUS$5.02billion
EquityUS$7.71billion
TWTR Stock Fundamentals

The company has a debt to equity ratio of 67.4% and over 10% of its current market capitalisation is debt.

Twitter Q2 2021 Earnings Annoucement

The company released to the market on July 22, 2021, their Q2 2021 Letter to shareholders. Total revenue in the company’s prior comparable quarter was up 74% to $1.19 billion, with a relatively small operative income of US$30million.

Twitter mentioned this reflects better-than expected performance across all major products and geographies. Strong revenue performance also drove better-than-expected profitability, with GAAP operating income of $30 million and GAAP operating margin of 3%.

Twitter also notes that International revenue has been increasing significantly with their second largest Market being Japan

Key Performance Indicators for Twitter from the Q2 FY21 report to shareholders

Twitter is also increasing their monetisation strategy with Ad revenue, ticketed spaces, Tip Jar and Super follows, these should continue to drive revenue as additional users are added onto the platform. However, as per the above advertising revenue contributes approximately 90% of the group’s revenue.

Twitter also released Blue in Q2 in Canada and Australia, Twitter’s first-ever consumer subscription offering. Twitter Blue allows our most passionate and engaged accounts to pay for exclusive features and perks that enhance and complement their existing Twitter experience. Today these features include the ability to better categorize and organize Bookmarks to more easily discover and access content; the ability to set a timer to Undo a Tweet before it goes live; and Reader Mode, which streamlines the reading experience for longer Tweet threads.

Contribution of Twitter Revenue Between US and International

Should I Buy Twitter Stock: Financials

Should I Buy Twitter Stock – Income Statement

Total revenue was $1.19 billion in Q2, an increase of 74%, or 72% on a constant currency basis. Total US revenue was $653 million, an increase of 79%.

Total international revenue was $537 million, an increase of 69%, or 64% on a constant currency basis.

Total advertising revenue was $1.05 billion, an increase of 87%, or 85% on a constant currency basis. Year-over-year growth in advertising revenue benefited from underperformance in Q2’20 due to the global pandemic and US civil unrest in the year-ago period.

Source: Company Data

Twitter has also been growing revenue YOY at a significant rate since 2012. See below:

Twitter Revenue Since 2012: Source Company Data

Twitter at the time of writing has approximate 200million Monetizable daily active users, this is compared to Facebooks more than 2.45billion users worldwide.

Should I buy Twitter Stock – Balance Sheet

Twitter Stock finished the quarter with approximately $8.61 billion in cash, cash equivalents and marketable securities. This also includes the funds from the companies offering convertible notes in March.

Twitter Stock had Net cash provided by operating activities in the quarter was $382 million, an increase from $201 million in the same period last year. Capital expenditures totalled $276 million, compared to $162 million in the same period last year, driven by infrastructure investments in data centre build-outs to support audience growth and product innovation.

Twitter Stock reported an adjusted free cash flow of $106 million, compared to an adjusted free cash flow of $39 million in the same period last year.

Twitter also bought back a total of $334 million of stock during Q2 via their share repurchase program announced last year, bringing our total repurchase to $746 million to date.

TWTR Stock Competitive Analysis

When you think of Twitter you tend to think Facebook is their main competitor, in this case, we also agree but Twitter also offers a number of features that Facebook does not offer. Twitter in our opinion is not in direct competition with Snapchat, TikTok or any other Photo or Video sharing platforms.

We would consider Facebook and potentially Pinterest and LinkedIn as the prime competitive companies in the same space that Twitter operates in.

From the above table, you can see whilst Facebook’s market cap is over USD$1 trillion it trades on a much lower price to earnings ratio than twitter, potentially due to perceived growth. Price to book and price to sales between Facebook and Twitter is roughly inline. Snapchat seems to be significantly overvalued when compared to Twitter, however, if it does, however, live up to the aggressive multiples then potentially the current valuation of SNAP makes sense.

Of the three above, we believe NYSE:TWTR will continue to add users and revenue at a much faster rate as this will be coming off a much lower base than FB and in our opinion, TWTR Stock is further along with a viable monetisation strategy than Snapchat.

Twitter at the time of writing has approximate 200million Monetizable daily active users, this is compared to Facebooks more than 2.45billion users worldwide and SnapChats 229million daily users.

Prophet’s Take on TWTR Stock

Twitter is a prime example of what we see will happen to the Tesla Share price, the initial IPO hope and massive valuations of the company from 2014 took seven years for investors who purchased stock at the peak are now only sitting on a 1.09% return many years later.

In comparison to Facebook stock which is worth over USD$1Trillion dollars, Twitter trades on a market cap of only US$55billion.

TWTR has Total assets currently at US$9.73billion. Total Short Term Liabilities are currently sitting at US$2.26billion. The company have a significant portion of cash and cash equivalents on hand at just over US$8.6 billion.

Our thesis on TWTR is, that as the company’s network effect starts to kick into full form and the advertising segment of Twitter is more mature the company should become more profitable over time. Twitter is already cash-flow positive and if it can manage its costs in line with growth it could become a cash-generating machine.

We are bullish on the future of TWTR shares. 

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