Editor's Note: Shares of Twitter (TWTR) have surged over 33% since our Internet & Media analyst Hesham Shaaban added it to his "Best Idea" list on 12/20/17. For comparison's sake, the S&P 500 is essentially flat during this time period. For more info on how you can subscribe to his research email firstname.lastname@example.org.
We're good to go on the fundamentals after vetting the last two risks to our thesis. Naturally we don't love the entry point given TWTR's recent run, but we would rather risk a pullback than being on the outside of what we expect to be a pending upgrade cycle (consensus ~75% hold/sell rated). See the note below for an overview of our thesis, and let us know if you have any questions beforehand.
TWTR | Moving to Long Bench
11/29/17 10:12 AM EST
KEY POINTS OF DISCUSSION
BACKGROUND (2014-2016): We estimate that the series of events that ultimately led TWTR to restructure was the result of self-inflicted wounds on the part of an unsustainable monetization strategy. We will break down the history of its business model to provide context around why we're now getting constructive.
WHAT'S CHANGED (2017): We originally viewed TWTR’s decision to restructure as a cop-out preempting an inevitable decline in ad revenue. Now we realize that mgmt has also been right-sizing its model and pivoting its monetization strategy in the process. We'll run through the underlying detail, and why we believe the model is now built for sustainable growth.
LOOKING FORWARD (2018): We suspect TWTR could return to double-digit revenue growth by 2H18. Further, after vetting what we had previously viewed as the two biggest risks to the story (users and advertiser demand), we now feel more comfortable heading into 2018 given the collective growth driver between the two. More detail on the call.