Twitter Inc (NYSE: TWTR) is having a relatively modest day in the market today following the massive gains that we saw on the stock yesterday. The gains yesterday were driven by an earnings report that was far better than analysts expected to see. With that in mind, is TWTR the next big opportunity in the market? We’ll talk about that in a bit. Before we do, we’d like to give a big thank you to our partners at Trade Ideas for being the first to alert us to the gains yesterday and today alike. Currently (9:37), TWTR is trading at $20.37 per share after a gain of $0.07 per share or 0.34% thus far today.
The TWTR Story
Before we get into whether or not this is a compelling opportunity, it’s important that you know a bit about Twitter’s back story. The company had an incredibly hard time not too long ago. The reason was relatively simple. User growth was moving at a snail’s pace and investors didn’t think that the company had it in it to change this. In fact, the previous CEO of the company, Dick Costolo resigned amid user growth issues.
However, this started to change over time. Over the past year or so, TWTR user growth metrics have been improving greatly, and that has proven to be exciting to investors. Then, with the strong earnings report, the stock saw massive gains, climbing by around 20% in a single trading session.
What Was So Great About Earnings?
Overall, the earnings that TWTR reported proved to be overwhelmingly positive. When it comes to adjusted earnings per share, the company reported $0.10 per share, doubling expectations among analysts. Not only that, the company beat revenue expectations by around $3 million.
Then, we take a look at user growth and the story becomes an even more positive one. During the quarter, monthly active users were up by 4%. On top of that, daily active users climbed by 14%, showing that Twitter is finally getting hold of what it takes to get its user base to grow.
While all of this data is important, it isn’t the only reason for the massive gains that we saw on the stock. At the end of the day, the big reason for the gains that we saw on TWTR has to do with profitability. With the earnings report, Twitter said that it is expecting that it will finally generate a profit in the fourth quarter. Of course, this proved to be exciting to investors.
So, Is TWTR The Next Growth Opportunity?
This is a hard question to answer. The reality is that if the fourth quarter does go as well as the company expects for it to go, we can expect to see massive gains following the fourth quarter and full year earnings report. After all, if a profit is generated, it shows that the company’s cost-cutting measures are working and that it is executing well with efforts to grow revenue. However, if the company misses expectations here, it can be damning. Nonetheless, considering the strong Q3 performance, it’s definitely possible that the company will indeed generate a profit and that TWTR will become the next hot ticket!
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on TWTR. In particular, we’re interested in following the continued user growth as well as the company’s continued efforts to bring profit to its investors. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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