Twitter Quarterly Sales Outperform Driven By Ad Revenue; Shares Rise

Twitter reported better-than-expected 4Q results driven by 31% growth in advertising revenue, but warned about rising costs in 2021. Shares rose 3.5% in Tuesday’s extended trading session after closing 2.9% higher on the day.

The social media giant’s 4Q total revenue grew 28% to $1.29 billion and surpassed the consensus mark of $1.19 billion. Adjusted earnings increased 52% to $0.38 per share on a year-over-year basis, beating Street estimates of $0.31 per share.

Meanwhile, Twitter’s (TWTR) average monetizable daily active usage (mDAU) increased 27% year-over-year to 192 million, but fell short of analysts’ expectations of 196.5 million. The company recorded more than 50% growth in mobile application promotion (MAP) revenue as the recent relaunch of the MAP offering picked up.

The company said, “We expect to grow headcount by more than 20% in 2021, especially in engineering, product, design, and research. Given the hiring and investment decisions made in 2020 and previous years, along with anticipated 2021 headcount growth, we expect total costs and expenses to grow 25% or more in 2021, ramping in absolute dollars over the course of the year.”

For 1Q, total revenue is anticipated to be in the range of $940 million to $1.04 billion versus analysts’ estimates of $965.14 million. For 2021, the company forecasted stock-based compensation expense to be in a range of $525 million to $575 million. Capital expenditures are expected to be between $900 million and $950 million. (See Twitter stock analysis on TipRanks)

Following the 4Q results, Oppenheimer analyst Jason Helfstein increased the stock’s price target from $58 to $70 (16.9% upside potential) and maintained a Buy rating. The analyst noted, Twitter’s “medium-term revenue outlook seems highly compelling following MAP rebuild/launch ahead of expectations, progress in onboarding SMBs, and the forthcoming subscription offering.”

Wall Street analysts are cautiously optimistic about the stock. The Moderate Buy consensus rating breaks down into 8 Buy ratings, 13 Hold ratings and 2 Sell ratings. The average analyst price target stands at $54.57 and implies downside potential of about 8.9% to current levels over the next 12 months. That’s after shares jumped 61.7% over the past year.

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