Morgan Stanley analysts Scott Devitt, Jordan Monahan, Erhan Soyer-Osman and John Egbert rate Twitter Inc (NYSE:TWTR) as Underweight.
Twitter’s fourth quarter earnings
Twitter Inc (NYSE:TWTR)’s 4Q results show signs of slowing user growth and engagement:
ValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis
- MAUs grew slower than expected, suggesting that Twitter may be finding it more difficult to capture a more mainstream audience. US MAUs came in at 54m (+3% Q/Q), vs. International MAUs of 187m (+5% Q/Q). We see 2014E US / International MAUs of 64m / 235m representing growth of 19% / 26% Y/Y.
- Timeline view growth continued to decelerate, with WW timeline views per MAU per day, a key measure of user engagement, decreasing 3% Y/Y and 11% Q/Q. We estimate WW timeline views of 164b (+20% Y/Y) in 1Q, and 708b (+19% Y/Y) for FY2014.
- Total WW revenue grew to $243m (+116% Y/Y), with ad revenue totaling $220m (+121% Y/Y). We estimate 2014 / 2015 total ad revenue of $1.2b / $1.8b, growing 95% / 51% Y/Y. Twitter Inc (NYSE:TWTR) reported WW ad revenue per 1000 timeline views of $1.49 (+76% Y/Y); we model $1.63 / $1.96 or growth of 63% / 20% for 2014E / 2015E.
- Adjusted EBITDA grew faster than we expected in 4Q, with gross margin reaching 74.8%, while EBITDA grew 155% Y/Y (18.4% margin). We estimate 2014 / 2015 EBITDA of $181m / $385m, representing a 14.5% and 20.9% margin, respectively.
Estimate changes and valuation
We increase our 2014-2017E ad revenue by 11-17%, adjusted EBITDA margin by 6-7%. We raise our 12-month DCF-driven price target for Twitter Inc (NYSE:TWTR) to $36 (was $33), equivalent to 13X / 62X revenue / EBITDA against 40% / 79% CAGRs (2015-2018E).