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Here's Why Twitter Is a Buy

June 04, 2014 | About:
tyokunbo

tyokunbo

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Twitter (TWTR) is a platform for users’ self-expression in a real time. It allows people to express themselves and discover content. Twitter’s products include Twitter, Vine and music solutions. The company also provides a set of tools that developers can utilize to contribute their content to the platform. Also, Twitter offers promoted tweets, promoted accounts and promoted trends that enable advertisers to publicize their brands. The company was founded in 2006 and is headquartered in San Francisco, Calif.

Numbers at a Glance

Twitter’s revenue in the first quarter accelerated on a year-on-year basis by 119% to $250 million. The revenue was fueled by increased users’ engagement and growth. The monthly active users grew to 255 million in the quarter. The company’s GAAP net loss was $132 million, but it includes $126 million of stock-based compensation expenses. Twitter ended the quarter with $2.2 billion of cash and marketable securities.

Outlook

Twitter expects total revenues of $270 million to $280 million in the second quarter. The company expects stock-based compensation expenses in the range of $170 million to $180 million. For the 2014 full year, Twitter is raising its range for its total revenue to between $1.2 billion and $1.25 billion. This is $50 million above its previous range. Twitter expects its stock-based compensation expenses to be in the range of $640 million to $690 million.

Initiatives for Earnings Growth

Twitter recently announced its mobile app download suite. It is the first of the company’s products to be integrated into its mobile ad exchange segment. The initiative now reaches over 1 billion iOS and Android users.

Twitter acquired social data analytics firm Gnip recently. The step will give the company more control over the monetization of its data. In addition, Twitter recently purchased Cover, SecondSync and Mesagraph. The acquisitions are to boost its revenues in the near future.

Competition

Twitter faces a stiff competition from giants such as Facebook (FB), Google (GOOG), and LinkedIn (LNKD). Compared to its rivals, Twitter is investing wisely to deliver a continued long-term growth for its shareholders. By making its platform to be visually engaging, it is clear the company wants to extend its geographic reach.

Wings Across the World

Twitter might have an American root, but it is a truly international phenomenon. The company is relying on growth overseas to fuel its continued expansion.

A look at Asia

Twitter’s most active market outside the U.S. is Indonesia. Japan and India have also embraced it. In India, Twitter has 6.5 million followers of the service. Though Twitter is banned in China, tens of millions of Chinese users circumvent firewalls to access the social media network. Twitter is talking with Chinese companies that advertise in it about ways they can work together.

Conclusion

Twitter is engaged on a number of initiatives to drive its users’ growth, so it is well-positioned to meet challenges in the internet information providers sector. Its profit margins are normalizing, and the company is innovating. This will bring value in the near future. The company has a strong financial position, and it has a great opportunity to expand internationally. Therefore, I feel bullish about the company.


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