Twitter’s Earnings Topped Wall Street Expectations. HERE IS WHY!

Twitter stock rallied to a 2019 high in Tuesday's pre-market after beating first quarter estimates. The company has exceeded its quarterly earnings per share ( EPS ) estimates by 22 cents and its revenue expectations by 1.5% at $787 million.

After Twitter reported its bullish metrics, the stock jumped more than 18% and pulled back, settling at the +15.64% at the end of the trading session.
The key facts reported by Twitter in its earnings press release were as follows:
  • Revenue was $787 million, up 18% year-over-year, reflecting particular strength in the US. Total US revenue was $432 million, an increase of 25%.
  • In Q1, revenue outperformance, in combination with lower expenses, resulted in better-than-expected profitability, with GAAP operating income of $94 million and GAAP operating margin of 12%.
  • Average mDAU in Q1 was 134 million, up 11% year-over-year, driven by organic growth as well as ongoing product improvements and marketing.
  • Total ad engagements increased 23% y/y, resulting from higher ad impressions and improved clickthrough rates ( CTR ) across most ad formats. These metrics reflect ongoing strong ROI for Twitter’s advertisers.

To put this earnings news in context, let’s take a look at the Twitter’s price chart and the signals of technical indicators:
The 30-day Exponential Moving Average ( EMA ) is growing and the market price is above the EMA , which is a strong technical signal of an upward trend.
Market price has surged above the 2019 high at $35.3, thus breaking an important resistance level and generating a price momentum upwards.
The monthly stochastic oscillator is engaged in a full-blown buy cycle, offering a stiff tailwind for buyers after the earnings news.

The takeaway: Undoubtedly, in Q1’19 Twitter has reported very strong fundamentals, and the price chart confirms that the trend is upwards. This quarter continued a sequence of previous quarters of consecutive healthy gains and reinforced the already growing optimism around the company.

We believe that the Q1’19 has really shown a sign that Twitter is on the path to accelerated revenue and user growth. Not only did they beat the revenue expectations by a wide margin, but they also beat on a monetizable daily active users (mDAU) growth. So this is a sign to investors that all of Twitter’s investments in product innovations, aimed at making the product easier to use, are having an impact .

Revenue strength reflects successful execution across product and sales, coupled with broad-based advertiser demand. Average mDAU has grown up 11% y/y, meaning that the app is driving more people to enjoy conversations on Twitter every day.

We believe Twitter still has a long way to go in terms of making its product more conversational, innovative and easier to use. Continuing product improvements will be driving the mDAU numbers consistently higher. And, we know that advertisers are following where the users’ eyeballs are and, as the mDAU numbers go up, advertisers will follow along.

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