Twitter Inc (NYSE: TWTR) is in the news after the company hinted at ending the “like” button in its feeds. Twitter’s CEO Jack Dorsey thinks this move will add to the quality of the debates taking place on Twitter. Irrespective of the effects and timing of this move, let’s take a detailed look at Twitter stock.
Twitter surged earlier this month after the company posted better-than-expected third quarter results. Twitter’s earnings per share in the quarter came in at $0.21, much better than the Street’s forecast of $0.14. Revenue in the third quarter increased by 29% year over year, while gross margin jumped by 4 full percentage points. Operating profit in the quarter turned positive.
Twitter Inc (NYSE: TWTR) stock gains came even when the company reported a 9 million drop in its active user count quarter-over-quarter. As of the end of the third quarter, Twitter had just 326 million monthly users. But we believe most of the loss of monthly users was because of Twitter’s action against fake and abusive accounts. The company is now showing zero tolerance for fake and provocative accounts. These measures will increase the quality of the platform in the future.
Several analyst firms gave a bullish outlook for Twitter Inc (NYSE: TWTR) stock after the third quarter results. Goldman Sachs analyst Heath Terry increased his price rating for Twitter to $48 from $43 and reiterated a Buy rating. Terry said in a note that Twitter’s quality initiatives will positively affect the company’s long-term growth prospects, increasing engagement and monetization.
Barclays’ analyst Ross Sandler maintained his price target for Twitter stock to $27. The analyst believes that Twitter is making “strides” in a difficult market environment.
Investment firm Oppenheimer predicts that Twitter will touch $37 within a year. The firm said in a report that Twitter’s management has successfully stabilized pricing and expenses. There is reduced “execution risk” around Twitter stock for investors, according to the report. The firm is also bullish that Twitter will post better-than-expected fourth quarter revenue.
Twitter’s fundamentals remain strong. The company has over $6.5 billion in cash and about $3 billion in debt. With increasing political polarization and debates, Twitter’s monthly active user count will grow. Twitter’s shift to video content has started to pay off. The company is earning over $280 million in revenue from video ads.