Buy Twitter (TWTR) Stock Ahead Of Q2 Earnings?

Twitter (NYSE:TWTR) is set to report its second quarter earnings this Friday before the opening bell. Twitter is coming off a spectacular fiscal 2019 first quarter that sent the stock soaring in the aftermath of the top and bottom-line beat. The social media giant is currently up 34.2% year-to-date and is looking to report another strong quarter later this week. Twitter has been trying to reshape its platform into a safer and more open conversational outlet for its users. The social media company has also been trying to diversify its revenue streams by playing its hand at a variety of different content. Let’s take a further look into what the company has been up to and what to expect from them for Q2.

Company Overview and Q1 Highlights

Twitter’s initiatives to add new features and focus on effectively tackling abuse issues that occur on its platform have helped it expand its monetized user base. Twitter’s unique open platform is appealing because of its real-time content and conversational format. The platform’s design makes it easy to comment and interact with other user’s tweets, and allows users to spread their opinions and thoughts with a large and diverse community of people. The recent extended character limit was received with open arms by users as it gave them the ability to articulate longer thoughts and opinions.

Twitter has recently shifted its focus into the realm of sports live streaming. The company has recently reached live streaming deals with the NBA, Turner Sports, and Fox Sports. The platform is already a source for millions of sports fans to get the most up-to-date sports news so investing in live streaming could be a seamless transition for the company.

For Q1 2019, Twitter surpassed our sales estimate by 1.6% and our bottom line estimate by a whopping 40% with a reported $787 million and $0.21 per share, respectively. Revenue increased 18.3% year over year, and earnings were up an incredible 212.5% from Q1 2018. Advertising revenue attributed $679 million for a 18.1% jump from the year ago quarter. Data Licensing and other revenue contributed the remaining $107 million, which was an 18.89% year over year increase. Twitter’s net income made a tremendous jump from the year ago quarter, bringing in $191 million for a 213% surge. The company’s geographic revenue for the US was able to beat our Key Company Metric Estimate by 5% with $432 million in revenue.

The company announced that they will no longer be reporting their Monthly Active Users metric, but instead introduced the monetizable Daily Active Users metric. It is basically a measure of Twitter users who logged onto the platform on any given day through Twitter applications that display ads. Average monetizable Daily Active Users was 134 million, which is an 11.67% jump from Q1 2018.

Q2 Outlook

The company gave revenue guidance of $770-$830 million and an operating income forecast of $35-$70 million. Our Consensus Estimates are currently calling for a top line increase of 16.6% to $828.5 million and a bottom line jump of 5.88% to $0.18 per share. Our Key Company Metrics are projecting for advertising revenue to bring in $704 million for a 17.3% spike. Additionally, Data Licensing revenue is expected to increase 14.2% year over year by bringing in $124 million. Key Company Metric Geographic Estimates are also looking good for the company in Q2. Revenue from the US is projected to rally 20.9% by generating $443.6 million. International revenue is expected to generate $378 million, which would be a 9.9% hike from Q2 2018.

Twitter was able to start off 2019 with a strong quarter that set the tone for a solid overall fiscal year. Twitter seems poised to improve its platform for its community of users in terms of security from abusive content and in terms of innovative features that can further appeal to potential and current users.

The social media giant continues to monitor its platform, removing fake pages and other content that the company deems inappropriate. Continued safety initiatives can boost user engagement and keep the platform enjoyable for all. The company’s vast acquisitions have also been a key catalyst for Twitter’s growth trajectory. TWTR has acquired over 50 companies that expanded its product portfolio and improved its software developer talent base. Furthermore, the company has made a habit of beating our Consensus Estimates and has an average EPS surprise of 28.5% over the last four quarters.

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