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Best tech/finance blogger on TipRanks. Alex Cho is ranked 7th among all financial bloggers, with a sector focus of technology stocks. The research he publishes captures the long-term growth potential of tech franchises, and market valuation. His research recommendations over the span of five-years has averaged into an annualized return of 19.3% across 392 ratings of which 66% were successful. Over his years of publishing, Alex Cho has been an indispensable source of information for an investment minded audience, which is why his lifetime viewership has exceeded ten million in total since 2012, across various media platforms. Furthermore, he’s frequently cited in various local business journals across the United States, and is frequently tagged with the “in-depth” designation on Google News for his public articles. The quality of his research is well known, and is well-respected which is why he’s frequently cited by other authors, journalists, bloggers and experts. Alex Cho was a former founding partner of Alexander & Cohen Capital Management, has worked as a consultant for mid-stage tech companies looking to raise capital or form an exit strategy, with the most recent consultation billed to a client that was generating revenue of $10 million+ in the web domain/registrar segment. Alex Cho is frequently invited to interview members of management at various Fortune 500 tech companies’ due to his outstanding media credentials, and credibility. Furthermore, he frequently attends various tech media events at the request of the event organizers. Alex Cho has a great relationship with Wall Street and Silicon Valley, as well. In the Venture Capital Space, he has sources that are inclusive of VC Partners, and independent research from PitchBook, Mercury Data, eMarketer, MergermarketGroup, and so forth. Anyone facing the public with investment related material needs quality sources, which should be inclusive of insights from Private Equity and various sell-side institutions and debt rating agencies as well (Standard & Poor’s, Fitch, & Moody’s). Alex Cho publishes with the support of Bank of America Merrill Lynch, Morgan Stanley Americas, Royal Bank of Canada Capital Markets, United Bank of Switzerland AG, Barclays Americas, Goldman Sachs, J.P. Morgan, Credit Suisse AG, PiperJaffray, Wedbush Securities, Oppenheimer & Co., Nomura Securities, BMO Capital Markets, Raymond James, Pacific Crest, SunTrust, Mizuho Securities, Deutsche Bank and Canaccord Genuity. Alex Cho attended ASU via the MAPP program with a 3.76 GPA in business-finance. The genius behind Cho has less to do with his academic accomplishments, but rather his ability to navigate, adapt, and improve the quality of his work through all the activities he has engaged. In the past year, Alex Cho has launched a new marketplace service referred to as Cho’s Investment Research. To learn more about this service, or to receive article notifications, be sure sure to subscribe. We provide frequent updates via our Blog Posts, which goes out to our subscribers.

All Eyes on Twitter (TWTR) Stock Ahead of Q1’19 Earnings


With a solid track-record of delivering earnings surprises over the past several quarters, Twitter (NYSE:TWTR) is expected to report first-quarter results tomorrow, before the opening bell.

Twitter’s stock has been in a sideways channel for the past 6-months between $30 to $35. In order to break out to new highs, the company needs to deliver a solid quarterly revenue and earnings beat. However, the risk is less to the downside, as the company trades at a fairly reasonable P/E ratio of 22.05, which implies that investors aren’t really pricing-in a whole lot of growth. If the company were to surprise on financial results, the multiple could quickly expand.

 

Analysts anticipate revenue growth to taper off, as there might be fewer opportunities to increase advertising load, and pricing might not improve as much given the slowdown in user growth metrics. Currently, the consensus anticipates 14% sales growth over FY’19 and FY’20. Expectations tied to revenue growth seem doable, as Twitter has grown sales at a much higher clip in FY’18 by 24 %.

Michael Pachter from Wedbush released a research note detailing expectations tied to Twitter earnings:

“For Q2:19, we expect revenue of $830 million (up 17% year-over-year and 6% quarter-over-quarter, vs. growth of 24% year-over-year and 7% quarter-over-quarter in Q2:19) and adjusted EBITDA of $317 million (up 20% year-over-year), reflecting an EBITDA margin of 38%, and roughly 100 bps of year-over-year margin expansion. Current consensus estimates for Q2 are for revenue of $819 million and adjusted EBITDA of $279 million. We estimate sequential mobile DAU (Daily Active User) growth of roughly 1 million in Q2, reflecting flat mobile DAU growth in the U.S. and growth of 1 million mobile DAUs internationally.”

Pachter has maintained a Neutral rating and $37 price target on Twitter heading into the quarterly earnings report. (To watch Pachter’s track record, click here)

Currently, the consensus expectations tied to the stock seem extremely conservative with analysts mostly interested in the improving profit narrative.

The set-up implies a steep drop-off of 10 percentage points of revenue growth over the next 24-months based on consensus expectations. The diminished expectations seem priced-in, and the stock trades at a relatively reasonable valuation at 22x earnings. So valuation is less of a concern because there’s some cushion given the diminished expectations tied to FY’19 and FY’20 sales, but the operating profit margin will need to trend higher by 1 percentage point to keep the profit narrative going.

Also, Jack Dorsey recently presented at a TEDx conference, which showed some of the strategy changes that might be taking place at Twitter. Though, the event was not directly related to shareholders, Dorsey seemed fairly presentable when discussing the engagement metrics that they should emphasize less going forward. Most importantly though, he discussed some of the changes that he has made after becoming CEO, which involved scaling back the organization (hence the optimization towards profitability), and not ruining the pre-existing app experience. Dorsey also floated the idea of de-emphasizing certain “like” and “follower metric” signals if he could do it all over again but given the popularity contest of social media those metrics are unlikely to go away.

Bottom line:

If Twitter does deliver a sudden surprise like it did in 2018, the stock could easily rally by a significant amount, but if not, a 22x earnings multiple isn’t likely to sink by much either. In terms of where the app might improve, there’s no clear path, other than the idea of improving moderation and community enforcement, and better engage audiences with open conversations.

 

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