Reports Q1 2019 Profit on Tuesday, April 23, before the market opens
Revenue Expectation: $ 775.23M
EPS: $ 0.15
For Twitter investors (NYSE :), or even for those considering buying stocks, the past year was confusing. It has become difficult to get a clear picture of the growth potential of social media stocks since the company is undergoing major restructuring, even if it is critical that it does not do enough to curb online violence and hateful language on its platform . This negative perception can improve if the San Francisco-based company reports its first quarter earnings on Tuesday.
Although the threat of government regulation for social media platforms has increased, we still recommend recommending Twitter shares for long-term investors. The reason: the company has successfully supported its growth momentum, even while working in a difficult environment full of multiple headwinds.
The past year, 2018, Twitter proved financially sound. It saw its first full year of profitability according to generally accepted accounting principles. Fourth quarter sales increased 24%, while earnings, excluding some expenses, increased to $ 0.31 per share, compared to the estimate of the average analysts of $ 0.25.
What makes Twitter attractive to both users and advertisers is the continuous improvement of user engagement, in addition to the company's efforts to clear its platform of fake accounts. In order to attract both advertisers and users, Twitter has simplified the platform, making it easier for people to find relevant content and accounts to follow.
In our opinion, as we said in March, Twitter is smart in this environment, where regulators, politicians, and the general public are investigating social media companies in more detail after a series of data breaches and political manipulation of these platforms. made the headlines.
The company has provided transparency by adopting an open approach to problems within its network. Since last summer, CEO Jack Dorsey has warned that Twitter will not see user growth while taking a huge cleanup. In fact, the monthly active users on the platform averaged 321 million in Q4, a decrease of 9 million compared to the same period a year earlier, 5 million lower than in the third quarter.
Twitter & # 39; s recent stock performance also suggests that investor confidence in Dorsey & # 39; s strategy of transparency is increasing. Because shares reached the lowest price of December 2018 for $ 26.19, the Twitter shares won more than 30%. It closed on Thursday at $ 34.40.
Bottom Line
We do not expect any major positive surprises when Twitter announces its Q1 numbers tomorrow. At present, all social media platforms exist in a relentless state of fire fighting, while their shares remain very vulnerable to negative events.
That said, we also believe that Twitter is much better positioned to generate higher profitability in the future. As the company continues to strive for a larger market share of video ads, as part of efforts to improve user experiences by tackling spam and harassment, we see the company as a good long-term bet.
