Personal Finance

Why Twitter Stock Gained 23.4% in February

TWTR Chart

What happened

Twitter (NYSE: TWTR ) stock climbed 23.4% in February, according to data provided by S&P Global Market Intelligence . Shares gained ground following an encouraging earnings report that beat analysts' expectations.

TWTR data by YCharts .

So what

Twitter released earnings results on Feb. 8, which showed a return to sales growth and its first quarter of profitability. The results were paired with some encouraging guidance from management, and shares surged as a result of the improving outlook for the social media company.

A person using a mobile phone.

Image source: Getty Images.

While monthly active users grew just 4% year over year in the quarter ending in December, daily active users climbed 12%, indicating that the service's user base is becoming more engaged. Ad engagement climbed 75% compared to the prior-year period, reflecting increased user click-through rates and the benefits of shifting toward video-based advertisements.

Now what

While ad engagement saw a dramatic uptick, the cost to clients actually declined substantially -- down 42% year over year. If Twitter can continue to drive ad click-through while also keeping prices low for advertisers, the appeal of doing business on the platform will only continue to rise.

The company also sees a long-term growth opportunity in its data licensing and enterprise segment, and an 11% year-over-year sales increase in the fourth quarter combined with management's comments that a significant number of new deals have recently been signed shows momentum on that front. Twitter is making some commendable progress, but the stock's big run-up over the last year also makes it a riskier investment. Shares are valued at roughly 10 times forward sales, revenue is growing at a slow clip, and there's a limit to how much cost-cutting can be done at the company.

10 stocks we like better than Twitter

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now… and Twitter wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of March 5, 2018

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Twitter. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Personal Finance Videos

Black Friday Brings Higher Demand and Scarcer Deals

Nov 26, 2021

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More