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Is Twitter a buy into earnings?

It's time to break down one of the most popular social media names around. Here is the breakdown on $TWTR otherwise known as Twitter.

Current Price: $48.91

52/Wk High: $50.65

52/Wk Low: $20.00

Market Cap: $38.8 Billion

Read below for the breakdown!

Twitter is a popular text based social media platform. Twitter also offers promotion and advertisement services as well as real time communication on their core platform, making it a social media powerhouse.

Taking a look at the pricing of Twitter's stock itself, the stock price can be broken down by segment. According to TEFIS (@trefis), 49.48% of Twitter's stock price is based off of their United STates Regional Segment.

Furthermore, 35.37% of the stock price is based on Twitter's International segment and 15.15% is based on Twitter's Cash and or Net of Debt level.

Given that Twitter is to report earnings on the 29th, it is only right to check back and review the previous quarter. 

Twitter reported a Q2 miss, reporting an EPS of $-1.39, not the best. Secondly, Twitter missed on revenue expectations, reporting a Q2 EPS of $683 million, down -18.77% year-over-year.

It is also important to note that Net Income fell into negative territory during the second quarter to a low $-1.378 billion. Operating Income also turned negative in Q2, coming in at $-274 million.

On the brightside, Twitter continued to grow its user base, beating expectations. Twitter reported a Q2 monetizable daily active user count of 186 million users versus the expected 172.8 million, representing 34% growth in daily active users.

Digging into the balance sheet Twitter is well positioned.

Total Debt: $3.435 billion

Total Liabilities: $4.890 billion

Total Assets: $12.548 billion

Cash & Short Term Inv: $7.766 billion

Overall, Twitter's financial standing is solid and is not currently not a worry but when it comes to return on assets and return on equity I would like to see better numbers.

Return on Assets: -9.82%

Return on Equity: -15.39%

Moving into the pricing of the stock, even though Twitter has run big in the past several months, the stock is not extremely expensive.

Price to Sales: 12.01x

Price to Book: 5.21x

Although the numbers are not bad, the analysts remain only mildly bullish on Twitter. Currently the mean price target is $44.90/share, representing a -10.98% loss. 

Secondly, the high price target is $59.75/share, representing an 18.46% gain while the low price target is $33.00/share, representing a -34.58% loss.

The big money is also mildly bullish on Twitter. Currently, 70.08% of Twitter is owned by institutions. Top holders include The Vanguard Group, Morgan Stanley Investment Management, and BlackRock Institutional Trust.

When it comes to the charts, it seems Twitter could be flashing an opportunity. Currently the six-month MACD sits within an upward range of 1.84 down to 1.68 and seems to be maintaining solid strength.

Finally, the six-month RSI sits at 62.42 while the CCI sits at a high 123.81. Twitter alos trades less than three points off its highs. In short, the technicals are strong to the upside, and are not showing any signs of a significant pullback.

Based on Twitter's solid numbers, the current social trends due to the pandemic, and the bullishness of the stock, I believe Twitter is a strong long term pick.

In the short term though I urge caution due to market uncertainty, and if you do open a position in the name I recommend a close stop.


Disclaimer: This is not direct investment advice, simply opinion based on independent research.

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