The popular social media platform Twitter (TWTR), which connects users to a network of people, news, ideas, opinions, and information, is gaining momentum, with a gain of 10% in the past five days.
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With a market capitalization of $2.62 billion, TWTR has jumped 21.9% year-to-date, outperformed Nasdaq’s 12% gains, and soared 109.6% over the past year. (See TWTR stock chart on TipRanks)
Twitter Recent Efforts & Analysts’ Take
The networking giant has been trying hard to diversify its revenues and shape its subscription service.
In this regard, the company recently announced its first subscription service, Twitter Blue, which was designed for users willing to pay a monthly fee for exclusive features. Twitter Blue is essentially an “Undo” button, which gives users 30 seconds to delete a tweet if it needs editing. Currently, the service is available in Canada and Australia for CAD$3.49 and AUD$4.49 per month, respectively. However, the time frame for the rollout of the service to other places, including the U.S., is still unknown.
BofA Securities recently released an update on Twitter’s new subscription service and its impact on the company’s revenues. The analyst Justin Post reiterated the stock’s price target of $82 (23.3% upside potential) and a Buy rating.
Post stated, “Blue could be a $360mn revenue opportunity.” He further added, “If we estimate 10% of Twitter’s daily active users are prolific users who could be potential subscribers of Twitter Blue, and we assume a 50% conversion rate, we get to 10mn potential subscribers. Assuming a subscription fee at an average of $3 per month, it could imply an incremental run-rate subscription revenue of $360mn a year, a 5-10% incremental uplift versus 2021 revenue.”
Another analyst, James Lee from Mizuho Securities, expects the “much anticipated” subscription service to yield “modest” revenue upside to 2022 consensus estimates. However, he believes that the complete rollout in the next six to 12 months could lead to 1% to 7% revenue upside in 2022.
It does not stop here.
Twitter has been trying hard to boost its current product line with new products and services.
Last month, the company launched a verification application process allowing anyone to apply for the coveted blue checkmark. The new application process marks an important milestone in the company’s push to enhance transparency and credibility in the network.
Further, Twitter acquired Scroll to make it easier for publishers and writers to connect with readers. Moreover, Twitter has taken many steps to improve its accessibility, including synchronization of captions and the addition of scrollback and pause capabilities to its videos.
These new features could further attract other brands, thereby expanding revenues for the company.
On June 9, Vertical Group analyst Phil Leggiere upgraded the stock’s rating to Buy. He said the flow of new brand campaign promotions and product releases “accelerated further” in April and May, and are expected to boost Twitter’s growth momentum on a year-over-year basis.
Q1 Earnings Depicts Strong Fundamentals with Few Concerns
Twitter posted strong 1Q results that topped analysts’ expectations, driven by 30% growth in advertising revenue.
Total revenue grew 28% year-over-year to $1.04 billion versus the consensus estimate of $1.03 billion. Adjusted earnings increased 45.5% to $0.16 per share, beating Street estimates of $0.14 per share.
Meanwhile, Twitter’s average monetizable daily active usage (mDAU) jumped 20% year-over-year to 199 million, slightly short of expectations of 200 million. Notably, the company recorded strong growth in mobile application promotion (MAP) revenue and brand advertising.
The increase in mDAU reflects the increased retention across new and recently reactivated accounts due to the ongoing impact of product improvements, including continued increases in relevance across Notifications, Search, Explore, and the Home timeline.
Though the company maintained its objective of doubling revenues by 2023, Q2 sales guidance of $980 million to $1.08 billion versus analysts’ estimates of $1.06 billion was not so encouraging.
The company said, “We continue to expect total revenue to grow faster than expenses in 2021, assuming the global pandemic continues to improve and that we see modest impact from the rollout of changes associated with iOS 14.5.”
Following the 1Q results, Oppenheimer analyst Jason Helfstein decreased the stock’s price target from $85 to $70 (7.5% upside potential) and maintained a Buy rating as he views “TWTR well-positioned to benefit from reopening momentum related to live events and brand advertising rebound.”
TWTR Stock Average Analyst Ratings
According to TipRanks’ analyst rating consensus, TWTR stock comes in as a Moderate Buy. Out of 27 analyst ratings, there are 8 Buys, 18 Holds, and 1 Sell recommendation.
As for price targets, the average TWTR analyst price target of $68.04 implies 2.3% upside potential from the current levels.
TipRanks Metric
TWTR scores a 5 of 10 from TipRanks’ Smart Score rating system, indicating that the stock is likely to perform in line with market averages.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
