The social media giant Twitter (Ticker Symbol: TWTRWealth Strength IndexAAPL is Extremely Up and trending Up) reported earnings that beat Wall Street’s estimates on the top and bottom lines. Twitter reported a slight earnings per share beat of .20 cents per share vs. Wall Street analysts’ expectations of .19 cents per share. The company released a large revenue beat of $841 million vs. Wall Street analysts’ estimates of $829.1 million. Average monetizable daily active users (mDAU’s) were up to $139 million, which represents a 14% increase year over year.
Twitter also released some guidance for its next quarter of this year. The company expects revenue in a range between $815 and $875 million for the quarter and operating income to come in between $45 and $80 million. Twitter also indicated that investments in numerous departments within its own business could make operating expenses potentially go up 20% year over year.
Twitter’s stock took off to a great start in 2018, rallying just under 100% in the first two quarters. The rally was led by two good earnings releases and a move by the company into the S&P 500 index. Twitter put in an extremely overbought rating in its Relative Strength Index and began to consolidate at the top end of its range in the late second and early third quarter of 2018. A very poor earnings release in the third quarter of 2018 sent the stock gapping lower, right through its 50-Day Moving Average. The stock proceeded to grind lower before finding support at the $26.00 price level. Twitter had a mediocre start to 2019, staying positive, but underperforming the overall market. It finally made its way above its 50 and 200-Day Moving Averages again just before a monster earnings beat in the first quarter sent the stock gapping higher. The stock has spent just over the past 13 months forming a long term cup and handle continuation pattern. This is a pattern that resembles a “U” shape as the cup and the handle has a slight downward move to it similar to a bull flag. Cup and handles are considered bullish continuation patterns and it seems as if Twitter just broke out of its pattern to the upside following the earnings release.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 28 analysts offering 12-month price targets, the average price target for Twitter’s stock is $38.96. According to that number, the stock is priced right in-line with Wall Street analysts’ average price targets and could be considered at value around current levels near $39.29.
The social media space seems to be doing something right this quarter as the space has seen good results out of Twitter and Snap Inc. It has been a long time in the works and these stocks have struggled in the past to make solid profits. It seems as if the social media companies are learning how to monetize more successfully and are beginning to turn the corner for the better. Investors in the social media space should look to Twitter’s next earnings release on October 24th for fresh news within the company.