North America

Earnings Preview: Twitter Inc. Q2 2017 (TWTR)

By: Craig Bowles

Overview

Twitter, Inc. (TWTR) is slated to report 2Q2017 earnings before the open on Thursday July 27th. The earnings “letter” is expected at approximately 7:00 a.m. ET with a conference call to follow at 8:00 a.m. that is webcast through Twitter Investor Relations. Launched in July 2006, the global communication platform provider enables users to send and read short 140-character messages.

 

Outliers & Strategy

Key measures:

  • Non-GAAP Earnings Per Share (EPS): Analysts expect $0.05 (range -$0.02 to $0.13) (Source: Yahoo! Finance). Consensus was $0.07 three months ago.
  • Revenues: Company decided not to provide revenue guidance last qtr. Analysts expect a Y/Y decrease of 11.0% to $535.61 mln (range $502.0 mln to $576.5 mln). Consensus was $550.14 mln three months ago.
  • Average Monthly Active Users (MAUs): Last quarter increased 9 mln to 328.00 mln. Q2 expected at 332.00 mln
  • Mobile Monthly Active Users: Wasn’t available last quarter but previous was at 83% of total MAU’s which would have equated to 272.24 mln if the same percentage held.

Revenue Guidance for 3Q2017 and FY2017 (if available):

  • Revenues Guidance 3Q2017: Analysts expect a Y/Y decrease of 7.9% to $567.5 mln (range $508.3 mln to $615.0 mln).
  • Revenues Guidance FY2017: Analysts expect a Y/Y decrease of 8.0% to $2.33 bln (range $2.17 bln to $2.47 bln). Consensus was $2.35 bln three months ago.
  • Twitter’s market cap is $14.899 bln, up from $10.6 billion last qtr but down from $34.53 billion in April 2015. Price/Sales ratio of 5.9 compares to 21.8 in 2015.
  • Analysts view Twitter with 5 (4 last qtr) Buy, 21 Hold, and 14 Sell ratings. (source: MarketBeat.com)
  • Insiders sold 2,171,027 shares in the last three months and sold a net 1,969,850 shares in the past year. (source: NASDAQ.com)
  • Twitter shares have a 1-day price change on earnings of 10.03%. Options are pricing in an implied move of 9.92%.

Recent News

  • 07/20: Wells Fargo notes Twitter’s new video advertising options seem to be catching on with brands, according to Barron’s.com.
  • 07/11: Twitter appointed as CFO the former CFO of the small business unit of Intuit, Ned Segal, according to Barron’s.com.
  • 06/19: Twitter rolled out a new TV ad to push users to get more from the social platform, according to a post on Barron’s.com.
  • 05/26: BTIG thinks improvements that the company is making to its user experience will make the service more relevant, and that eventually ad revenue will follow. If the company succeeds with its video efforts and other new initiatives, the platform will be “too valuable to remain independent,” according to a post on Barron’s.com.
  • 05/19: Morningstar notes Twitter’s streaming deals aren’t limited to the U.S. — smart, given that a lot of the company’s growth is taking place overseas. The return of co-founder Biz Stone to the company remains a wild card. All these moves might not be enough to fix Twitter’s user-growth problems, according to a post on Barron’s.com.
  • 04/26: Twitter daily-active-user base was up 14% from a year ago in what is being called “The Trump Effect,” according to a post on Barron’s.com.

Technical Review

Twitter’s stock trended steadily lower from $53.49 on April 8, 2015 to May 2016’s $13.73 and again retested that low before last quarter’s earnings release. Anything above $19.50 is testing the upper bound of a balance area going back through 2016, so the stock is trading quite a bit differently going into this earnings report. (Chart courtesy of StockCharts.com)

Summary

Twitter co-founder Biz Stone is returning to Twitter and is expected to have an effect on the culture at the company. Twitter has seen analyst bullishness lessen over the past year and insider selling resumed. Private equity could show interest this year. The company has beaten earnings estimates by an average of 5c the last four quarters. Estimize consensus for Non-GAAP EPS of $0.07 on revenue of $544.78 mln compares to analyst consensus of $0.05 on revenue of $535.61 mln. Revenue guidance (if available) and user data will also factor into the market reaction.

 

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