Credit: Shutterstock photoShares of Twitter TWTR surged over 5% on Tuesday to hit a new 52-week high of $40.16 per share after it was announced that the social media company is set to join the benchmark S&P 500 index. This might put some added pressure on Twitter stock , but it still looks like a strong buy at the moment. Here's why.
Twitter stock hit its highest point in almost three years on Tuesday on the back of news that the company is set to be added to the S&P 500 index before trading opens on Thursday. Twitter will replace Monsanto MON now that the company's Bayer BAYRY buyout looks more assured. Therefore, Twitter will soon be a part of many passive funds that track the S&P 500 index (also read: A Quick Overview of the Bayer-Monsanto Merger After DOJ Approval ).
The company's volume had climbed to nearly 59 million through late afternoon trading, far above its average of roughly 27 million. Twitter ended Monday with a market value of $28.5 billion, which topped more than 60% percent of companies in the S&P 500. The social media firm also joined tech giants Amazon AMZN , Apple AAPL , and Microsoft MSFT , which all hit new 52-week highs on Tuesday.
Price Movement
Now that we have looked at Twitter's most recent gains and explained the reasoning behind the surge, let's take a look at more of the social media company's current fundamentals that make it look like an attractive stock.
Before Tuesday's gains, shares of Twitter had soared over 118% during the last year, crushing the S&P 500's roughly 13% climb. Twitter's year-long surge also tops its industry's 27% gain-this industry includes the likes of Snap SNAP , PayPal PYPL , and others.
Maybe more impressively, shares of Twitter have skyrocketed 160% over the last two years, which outpaces social media behemoth Facebook's FB roughly 63% climb. Investors will also note Twitter's great year to date performance.
Growth Initiatives
Moving on, Twitter grew its daily active user base by 10% in Q1, while its monthly active user base climbed by 3% to reach 336 million. Twitter's MAU growth might not seem that significant, adding only 10 million new users over the last year, but every user counts when it comes to growing its top line.
The company's advertising sales-which accounted for roughly 86% of Twitter's $665 million total Q1 revenues-climbed 21% from $474 million in the year-ago period to $575 million. Meanwhile, the social media company's international ad revenue surged 52%.
Going forward, investors should expect to see Twitter's adverting business become even more lucrative as it expands its live video reach. Twitter streamed more than 1,300 live broadcasts in Q1 and also announced that it signed more than 30 new partnerships in the first quarter, which includes deals with the likes of Fox Sports FOXA , NBCUniversal CMCSA , Viacom VIAB , Disney DIS -which includes a ton of ESPN programming-and many more.
Outlook
Twitter is expected to see its Q2 revenues pop by nearly 22% to hit $698.93 million, based on our current Zacks Consensus Estimates. For the current fiscal year, Twitter revenues are projected to hit $2.93 billion, which would mark a roughly 20% surge.
Meanwhile, the company, which reported GAAP profits for the first time in Q4, is expected to see its adjusted quarterly earnings skyrocket 112.5% to $0.17 per share. The company's fiscal 2018 earnings are also projected to soar by 68% to reach $0.74 per share.
Investors should also note that Twitter has received 10 earnings estimate revisions for Q2, with 100% agreement to the upside, all within the last 60 days. Meanwhile, during this same time frame, Twitter earned 13 upward revisions against zero downgrades for fiscal 2018.
Bottom Line
Twitter has been a great platform to share news instantly for years, but it had struggled to monetize its importance. Now, the company looks ready to profit from its live video push.
Twitter is also currently a Zacks Rank #1 (Strong Buy) and sports an "A" grade for Growth in our Style Scores system.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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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.
