Twitter Inc (NYSE: TWTR) has successfully become the second biggest social media stock. Let’s analyze the stock a bit deeper and find out the strengths that make it a buy in 2019 and beyond.
Recently, research firm Loop Capital in a report compared major internet stocks including Twitter, Netflix, Apple, and Google. The firm said that Twitter has the most growth potential out of all these stocks. The firm set a “Buy” rating for Twitter and gave a price target of $55.
Loop said that Twitter still needs to work on its user experience, as growth from the mass market remains “elusive” for the company. The firm said that Twitter was able to solve the engagement problem, but most of it is coming from the core users.
Twitter’s User Count Improving
In April, the Twitter stock surged after the company posted upbeat results for the first quarter of 2019. In the quarter, the company posted a monthly active user count of 330 million, versus the Street’s estimate of 318 million. Earnings per share in the quarter came in at $0.37, crushing the estimate of $0.15.
The core users of Twitter remain a major growth catalyst. Recently, Jim Cramer said that he likes Twitter due to its growth in engagement and users. Cramer said that Twitter has finally figured out ways to monetize content. The company’s total advertising engagements improved 23% over the past year, and cost per engagement decreased 4%, Cramer added.
“Other than Facebook, it’s the only social media play that’s actually profitable. At 33-times next year’s earnings, it’s not exactly cheap, but I think it may turn out to be a bargain in retrospect,” Cramer said.
Strong Product Features Paying Off
Twitter Inc (NYSE: TWTR) effort on its visibility, search and video are paying off. The company has partnerships with the NFL and ESPN. Twitter Moments — a feature that shows the best, curated tweets from around the world regarding the events taking place in the world — is getting a lot of traction. Twitter also has a partnership with Google according to which Google indexes content from Tweets. This is a great feature for small businesses and marketers. Businesses are using Twitter to increase their visibility in Google search results.
On May 29, Pivotal Research analyst Michael Levine initiated coverage for Twitter stock with a “Buy” rating. The analyst set a price target of $48 for Twitter stock. Levine said that he likes innovation in Twitter’s product and expects GAAP operating margins to improve into 2020 and beyond.
The author does not own any of the stocks discussed in this article.