The world’s most controversial social media company; Twitter loses money. Twitter Inc. (NYSE: TWTR) reported a quarterly operating loss of -$7.44 million on 31 March 2020.
Additionally, Twitter reported common net loss of -$8.4 million for the same quarter. In contrast, Twitter reported a quarterly operating income of $152 million and a common net income of $118.77 million for quarter ending on 31 December 2019.
Conversely, Stockrow estimates Twitter’s revenue grew at a rate of 2.84% in the quarter ending on 31 March 2020. In comparison, Twitter’s revenue grew at a rate of 10.84% in the quartering ending on 31 December 2019.
Therefore, Twitter is losing money but its business is still growing. So I think Twitter has a few value characteristics.
Is Twitter a Value Investment?
I suspect value investors could look at Twitter (NYSE: TWTR) because it has a history of making money, and its stock is cheap. Yet Twitter’s share price is very stable.
For instance, Mr. Market paid $34.34 a share for Twitter on 15 June 2020. Interestingly, Twitter’s share price has been stable in 2020. Twitter started 2020 at $33.20 on 2 January 2020, but fell to a low of $22 on 18 March 2020.
Thus, Twitter is a cheap growth stock with a stable price. However, many people; including me, question Twitter’s moneymaking capacity.
Can Twitter Make Money?
Despite its problems, Twitter can still generate revenue. For instance, Twitter reported quarterly revenues of $807.64 million on 31 March 2020.
However, those revenues fell from $1.007 billion in the quarter ending on New Year’s Eve 2019. Comparatively, Twitter reported a quarterly gross profit of $693.33 million on 31 December 2019. That quarterly gross profit fell to $523.6 million on 31 March 2020.
Importantly, Twitter still generates cash. Twitter reported an operating cash flow of $246.77 million for the last quarter. That quarterly cash flow fell from $277.18 million on 31 December 2019.
Additionally Twitter reported a $466.14 million investing cash flow for the quarter ending on 31 March 2020. That cash flow rose from -$1.047 billion on 31 December 2019.
Twitter can generate a Lot of Cash
Twitter can generate a lot of cash, for example, it reported a $3.493 billion ending cash flow on 31 March 2020. That ending cash flow rose from -$69.78 billion on 31 December 2019.
However, there is some evidence Twitter is borrowing a lot of money. Twitter reported a financing cash flow of $693.18 million on 31 December 2019 that rose to $963.98 million three months later.
To explain, the financing cash flow is the amount of money a company makes issuing debt. Therefore, Twitter is using debt to finance its operations or expand.
Finally, Twitter had $7.671 billion in cash and short-term investments on 31 March 2020. Twitter’s cash and short-term investments rose from $6.639 billion on 31 December 2019. Hence, Twitter is a cash-rich company.
What Value Does Twitter Have?
Twitter (NYSE: TWTR) is a minor player in the social media universe. Statista estimates Twitter had 386 million active users worldwide in April 2020.
In contrast, Facebook’s WhatsApp had two billion users in April 2020, Statista estimates. Moreover, Facebook Messenger had 1.3 billion users and Instagram had one billion users in April 2020.
However, Twitter’s usage is growing. Statista estimates Twitter had 330 million users in first quarter 2019. Hence, Statista estimates Twitter gained 56 million users in one year.
The World’s Most Famous Social Media Influencer
However, Twitter is home to the world’s most famous social media influencer; U.S. President Donald J. Trump (R-Florida). Twitter estimates that Trump had 82.1 million Twitter followers on 15 June 2020. In fact, Pew Research estimates one in five U.S. adult Twitter users followed Trump in July 2019.
Moreover, Twitter usage could surge as the American presidential election heats up. Interestingly, The Washington Post estimates Trump’s personal Twitter account gained over 55,000 followers in May 2020.
Hence, Twitter is a growing social media platform with some interesting assets. In addition, Twitter is a cheap stock that traded at $33.75 a share on 15 June 2020. Comparatively, Mr. Market paid $229.39 for Facebook (NASDAQ: FB) on the same day.
Twitter vs. Trump
However, Twitter is feuding with its most famous user and biggest attraction: Donald J. Trump Senior.
Twitter began “fact-checking” the President’s Tweets in May 2020. Twitter also put a rule violation on a Trump tweet. Trump has not retaliated, but he has asked for “more and fairer” social media companies, Reuters reports.
Oddly, one person who thinks Twitter has value is French President Emmanuel Macron. Ad Age claims, Macron has invited Twitter CEO Jack Dorsey to move to France. However, Macron is an advocate of internet regulation.
Is Twitter a Good Stock?
Twitter (NASDAQ: TWTR) is cheap and cash-rich, so I think it meets some value criteria.
On the other hand, Twitter pays no dividend. Therefore, Twitter also has some value trap characteristics.
To explain, I think Twitter could be a value trap because it is cheap and cash-rich but has no prospects for share value growth. For instance, Twitter’s share price is close to what it was in January 2020.
In the final analysis, I think investors need to avoid Twitter because it could have little growth potential. I believe Twitter will survive, but it has little capacity for growth.