After surging consecutively for three trading days, shares of Twitter Inc (NYSE:TWTR) hit a new 52-week high of $70.87 on Dec 24, 2013.
Twitter rose 8.4% ($5.42) to close the day at $69.96, which represents a return of about 55.8% since its Initial Public Offering (IPO). Currently, this Zacks Rank #3 (Hold) stock has a market cap of $38.11 billion.
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Key Growth Catalysts
Twitter’s bullish run is primarily driven by investor optimism on its ability to attract more advertising revenues, despite facing significant competition from Facebook (FB), Pandora (P) and market leader Google (GOOG).
As spending on online advertising is expected to increase manifold compared to traditional media, Twitter has massive growth opportunity, due to its strong mobile products.
According to market research firm eMarketer, U.S. mobile ad spending is expected to be approximately $9.6 billion in 2013, which accounts for 22.5% of all digital ad investments. Mobile ad spending is significantly up from 11.9% in 2012.
eMarketer expects Twitter’s revenue share in mobile advertising market to increase from 2.6% in 2012 to 3.2% in 2013. This is further expected to increase to 4.1% in 2014 and 4.4% in 2015.
Although this is much smaller compared to Facebook (12.2% in 2015) and Google (43.8% in 2015), Twitter’s frequent new product launches will help it to attract users at a much faster rate.
The company’s recently announced products such as Tailored Audience, messaging of photos and direct messaging are significant positives, which will help it to compete with the likes of Line, WhatsApp and Snapchat.
We believe that Twitter’s new mobile products will boost customer engagement and drive user base, which will fetch more advertising revenues, going forward. Mobile advertisement contributes approximately 70.0% of Twitter’s revenues. Moreover, we believe that the company has significant growth opportunity in international markets.
The Zacks Consensus Estimate for the fourth quarter has remained steady at a loss of 10 cents over the past 30 days. For fiscal 2013, the loss estimate increased 3 cents to 79 cents per share over the same time frame.