Twitter, Inc. (NYSE: TWTR) provided a superior viewer experience last year with live streaming NFL games. The ad revenue was not appreciated by the market evidenced by the drop in stock price. However, the content providers took notice. Bloomberg, BuzzFeed, MLB, PGA and the WNBA have now made similar streaming arrangements with Twitter.
Right about now a Twitter-bear is yelling, "Didn't they lose the NFL deal to Amazon?!!" Yes, but no. The newswire states that Twitter still has a streaming contract in place with NFL, but it's obviously not the same Thursday night arrangement. Some speculation is that they will focus on football highlights or some other auxiliary footage. When the content is paired with social interaction and easy likes or retweets, the perfect blend is made.
Basic stock investing methods would point out that Twitter, Inc. is without a price-to-earnings (P/E) ratio due to continued loss quarter after quarter. At the last earnings report, the Q1 '17 non-GAAP earnings were posted instead, which were a positive $0.11 per share and partially misleading. Non-GAAP metrics should be evaluated cautiously. The conventional price-to-book and free cash flow might be attractive when compared to peers. Additionally, ad revenue shows tailwinds.
"We've received positive early feedback from our ad partners as we highlight the improved return on investment from our audience growth and better pricing. We're proud of our performance in Live after just 6 months – last quarter alone we streamed more than 800 hours of live premium video and reached 45 million unique viewers, an increase of 31% from the previous quarter." COO Anthony Noto - Q1 '17 Earnings Call
At the end of Q1 2017, Twitter, Inc. had $203.45m in cash from operating activities. Their capital expense was $39.88m leaving them a free cash flow of $163.57m. This can't be compared to Facebook, Inc. (NASDAQ: FB) without converting it into a percentage of its market capital.
Twitter's FCF Yield is approximately 1.20% (Market Capital), which is the better value compared to Facebook's 0.87%. The yield in relation to Enterprise Value still has Twitter as the better option.
Free Cash Flow is obtained by taking the value of the company's operating cash flow and subtracting from it the value of capital expenses. The yield is then formulated by dividing the result by either the market capital or enterprise value.
Disclosure: I am/we are long FHCO; I/we have no positions in $SNAP or $TWTR, and no plans to initiate any positions within the next 72 hours.