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Twitter: Land Of Opportunity

Jun. 12, 2020 4:48 PM ETTwitter, Inc. (TWTR)META, SNAP63 Comments


  • Twitter has seen record usage and downloads during the Q2 events.
  • Revenue forecasts aren't matching user growth, providing upside to estimates as events return.
  • The stock is now the cheapest in the social media space at 5.4x EV/S while revenue estimates are too low.
  • This idea was discussed in more depth with members of my private investing community, DIY Value Investing. Get started today »

About the only stay-at-home play not seeing new highs is Twitter (TWTR). The social media stock has already verified record usage and daily app installs, but the company struggles monetizing users. My investment thesis remains very bullish that the company will eventually figure out how to monetize users at far higher rates and push the stock back to yearly highs similar to Facebook (FB).

Surging Traffic

In the course of five years, Twitter has gone from being the next MySpace fading into oblivion to having surging engagement. The social media service actually topped the other sites with traffic growth in Q1. Twitter went from no user growth back in 2015 to 27% mDAU growth exiting the quarter for a new rebound high. Prior to Q3 last year, Twitter hadn't topped 14% user growth going back over 5 years.

Source: Rich Greenfield Twitter

On top of the COVID-19 pandemic, the recent civil unrest has flooded people to Twitter. The site has long been the place to find out what's happening now and the events of today are leading to record engagement as evidenced by the mDAU growth and the surge in app downloads.

According to both Apptopia and Sensor Tower, Twitter had record app downloads worldwide during early June. Apptopia placed the peak at 677K on June 3 and Sensor Tower had the peak at 1 million downloads on June 2.

The numbers are very supportive of Twitter setting new mDAU user records in Q2. The company had 166 million mDAUs in Q1 and 30% growth in Q2 leads to the potential for reaching 175 million. A similar 14 million sequential mDAU increase would actually push the metric to a new high of 180 million.

Deep Value

The problem facing Twitter is that revenue growth doesn't match the surging users. Even

ChartData by YCharts

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This article was written by

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Stone Fox Capital Advisors, LLC is a registered investment advisor founded in 2010. Mark Holder graduated from the University of Tulsa with a double major in accounting & finance. Mark has his Series 65 and is also a CPA.

Stone Fox Capital launched the Out Fox The Street MarketPlace service in August 2020.

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Analyst’s Disclosure: I am/we are long TWTR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.

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