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Twitter company valuation in recent years


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Integral service around a transaction
BY : Diego GutiérrezMay Mon, 2019

Twitter is one of the social networks along with Instagram that has performed best in recent years, with a fairly steady growth in the number of users, Twitter managed to grow as an independent information network with illustrious users such as the President of the United States Donald Trump.

The Nasdaq-listed company has been through some big ups and downs over the past year, trading from $24 to $44 at its peak.

History

La red social Twitter fue creado en marzo del 2006. It was created as a microblogging company.

En el 2008, la empresa comenzaba a dar sus primeros inicios como compañía independiente. Ese año, la empresa estaba compuesta por sólo 18 personas, pero para el 2009, Twitter había multiplicado la cantidad de trabajadores; comenzó a nacer una organización de alcance mundial.

The company decided to add value to traditional microblogging and decided to create an advertising service.A key feature was the decision not to charge for the services offered until the active user base grew, which is why it was only financed through investments from venture capital firms.

En el 2010, el servicio de publicidad toma un nuevo enfoque y se crea “Promoted Tweets") which consists of sponsoring companies that wish to appear as the first search result within the social network. This is how it has been making inroads, little by little, into advertising with its service Twitter Ads.

It is currently a company with more than 300 million active users and where thousands of brands advertise on a daily basis due to the heterogeneity of the target audience they can approach.

Active Users

As mentioned above, Twitter's profitability and revenues come from more than a 90% of advertising revenuesThe results of this work have been achieved thanks to the loyal mass of active users.

It is therefore of vital importance to analyse this metric in order to understand the company's P&L and to detect anomalies or possible growth.

As can be seen in the graph below, the number of monthly active users (in millions) has varied greatly in 2008.

twitter users

As can be seen in the first quarters of 2018 there was a growth The number of monthly active users was quite high, however, this same metric showed a drop in the last two quarters.

Even so, the average consumption per active user rose, as did the number of users registered on the platform and the number of companies that decided to invest in advertising on the platform.

In 2019, it is expected that these figures will rebound and that there will be an increase in retention per user to help maintain sustainable revenue growth.

Financial Analysis

The first thing to emphasise is that due to the nature of the business based on an integrated platform that functions as a social network, the variable business costs are reducedThe only way to do so is by a ratio of 1:10 to income.

The bulk of the The costs are therefore generated by the structure generated, the amortisation of the projects carried out, marketing and salaries..

As mentioned above, thanks to the good performance in the first two quarters, the company was able to increase revenues in the second and third quarters. gross incomeaccompanied by a more than considerable increase of the EBITDA and managing to put in positive the benefit net of the company.

With respect to the balance sheet, it is interesting to see how the assets have been growing at a high rate, with a steady increase in the company's cash flow, a sign that could show a future future acquisitions.

In addition, it can be seen that the average payment period has been reduced, improving the working capital slightly.

twitter balance sheet

With respect to equity, we can see how the company has continued to raise funds to be able to finance without considerably increasing leverage, excluding the last year, in which it increased by close to 1 million dollars.

Even so, the company's indebtedness is not very high and the net debt to EBITDA ratio stands at 2.99x.

 

Contribution evolution

Twitter's share price has fluctuated widely over the years.

Born as a promise that was going to grow and revolutionise the world of social networks, it went to the market with very high optimism, however, even with reasonably high growth in the user base, it has taken the company a long time to start generating cash flow.

That is why the fluctuation in 2016 was so highThe Commission was expected at last to begin to make available positive cash flowsHowever, the results did not go his way, and he ended up sinking in the stock market.

As of 2017 however, the situation began to change and the cash flow generation started to have a positive effect on the share price, which reached maximum contribution levels following the publication of its 2018 results, in which it managed to beat many analysts' targets.

However, the future is not entirely certain, since the growth of the shrinking user baseThis is having an impact on the future expectationsand even more so if we take into account that there are other social networks such as Instagram that are achieving superior growth.

Twitter company valuation in recent years

Conclusion

The future of Twitter is going to be heavily dependent on the ability to attraction and loyalty of its users, although growth is expected over the next two years, in order to maintain this rate of growth the company will need to acquiring other businesses that are able to help diversify the source of income to create a contingency plan to help you overcome possible bumps in the road at specific times when there is less traffic on the social network.

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