In this article I will analyze and compare Twitter (TWTR) and Meta Platforms (FB) to determine which social media stock is currently a better buy.
A social networking service is a web-based service created for people, enabling them to share social relationships and special-interest networking with other people. The global social networking platforms market is expected to grow at a CAGR of 25.38% during the forecast period, reaching $939.68 billion by 2026, Research and Markets reports.
acclaim, the number of social network users is projected to increase to 4.41 billion by 2025, driven by the increasing penetration of electronic devices and rising data consumption. Accordingly, this trend implies obvious benefits for key players in the industry
Twitter is a technology company that offers communication services by allowing users to consume, create, distribute and discover content on its Twitter platform. Meta Platforms (formerly known as Facebook) is a global social technology company that develops products, allowing users to connect through smartphones, PCs, and other devices. The company operates across two business segments: Family of Apps and Facebook Reality Labs.
Year-to-Date (YTD), shares of TWTR gained 3%, while FB has plunged 36% over the same period.
On April 12th, Twitter announced that it had acquired the mobile push notification platform OpenBack. Jay Sullivan, Head of Consumer Product at Twitter, emphasize OpenBack’s ability to make apps more engaging. Also, the financial side of the purchase wasn’t disclosed. Sullivan noted that the company’s purpose is to strengthen the push notifications experience on the platform and promptly connect people with relevant content.
Recent Quarterly Performance & Analysts Estimates
On February 10th, Twitter issued an earnings report for the fourth quarter of 2021. In Q4, Twitter’s total revenue was up 21.7% on a year-over-year basis to $1.57 billion. The revenue growth was primarily achieved due to the 22% increase in advertising revenue to $1.41 billion. Besides, its data licensing and other revenue totaled $154 million, up 15% year-over-year. However, the company missed Wall Street revenue consensus estimates by $6.33 million. Also, Twitter reported GAAP EPS of $0.21, topping Wall Street expectations by $0.05.
In Q4, Twitter’s average monetizable daily active usage (mDAU) stood 13% higher YoY at 217 million, driven by product improvements and global conversation around current events. Notably, the company’s ad engagement decreased 12% year-over-year, while the cost per engagement increased 39% year-over-year.
Wall Street analysts expect TWTR’s earnings to drop 82.98% in the first fiscal quarter of 2022 to $0.03 per share. However, its revenue for the current quarter is expected to advance 18.39% year-over-year to $1.23 billion.
On February 2nd, Meta Platforms delivered a fourth-quarter earnings report. Meta’s fourth-quarter revenue increased 20% year-over-year to $33.67 billion, topping the Wall Street consensus revenue estimates by $230 million. Besides, FB’s daily active users came in 5% higher YoY at 1.93 billion on average for December 2021, while monthly active users grew 4% YoY to 2.91 billion as of December 31st, 2021.
On the other hand, Meta Platforms’ total costs and expenses have been reported at $21.09 billion, 38% up year-over-year, causing an 8% year-over-year drop in net income to $10.29 billion. As a result, the company’s Q4 GAAP EPS stood at $3.67, missing consensus estimates by $0.16.
For the first quarter, analysts expect FB’s EPS to come in at $2.51, down 23.93% year-over-year. Additionally, Wall Street expects the company’s revenue to increase by 8.31% YoY to $28.35 billion in FQ1.
Comparing Options Market Sentiment
Looking at the May 20th, 2022 option chain for TWTR and FB, we can define options market sentiment by analyzing the open interest levels. In Twitter’s case, the open calls/open puts ratio at the $46.00 strike price comes in at 2.68x, implying a bullish options market sentiment. When it comes to Meta Platforms, the open calls/open puts ratio at the $220.00 strike price stands at 1.48x, indicating a relatively weaker bullish market sentiment.
Bullish Options Bets Placed On TWTR Stock
The options, which expire on May 20th, 2022, saw increased call buying on Tuesday, April 12th. The open interest for the $55.00 calls rose by 8,213 contracts to a total of 20,332 open contracts (source: barchart.com). A buyer of those calls would need the stock to rise to $56.16 by the expiration date, a gain of about 26% from TWTR stock’s current price.
I believe that TWTR, at these levels, is a better long-term pick. Twitter recently revealed its acquisition of OpenBack could potentially bring long-term benefits to the company by increasing the mDAU metric. The company’s financials look a bit better, with a higher top-line growth figure and a higher-than-expected bottom line. TWTR is also expected to deliver a higher forward revenue growth rate. Finally, TWTR has a better options market sentiment at the moment, and options traders are betting on TWTR stock’s appreciation in the coming weeks.
TWTR shares rose $0.05 (+0.11%) in premarket trading Wednesday. Year-to-date, TWTR has gained 3.84%, versus a -7.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Oleksandr Pylypenko
Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist.