North America

Earnings Preview: Twitter Inc. Q4 2016 (TWTR)

By: Craig Bowles

Overview

Twitter, Inc. (TWTR) is slated to report 4Q2016 earnings before the open on Thursday February 9th. 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.

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Outliers & Strategy

Key measures:

  • Non-GAAP Earnings Per Share (EPS): Analysts expect $0.12 (range $0.06 to $0.17) (Source: Yahoo! Finance). Consensus was $0.12 three months ago.
  • Revenues: Company decided not to provide revenue guidance last qtr. Analysts expect a Y/Y increase of 4.2% to $740.13 mln (range $713.4 mln to $769.8 mln). Consensus was $753.25 mln three months ago.
  • Average Monthly Active Users: Last quarter was 317 mln.
  • Mobile Monthly Active Users: Last qtr, this metric bounced back to 83% of avg monthly active users for 263.11 mln.

Revenue Guidance for 1Q2017 and FY2017 (if available):

  • Revenues Guidance 1Q2017: Analysts expect a Y/Y increase of 5.8% to $629.29 mln (range $603 mln to $650 mln).
  • Revenues Guidance FY2017: Analysts expect a Y/Y increase of 9.3% to $2.79 bln (range $2.61 bln to $3.09 bln).
  • Twitter’s market cap is $12.36 billion (down from $34.53 billion in April 2015). Price/Sales ratio of 4.7 compares to 21.8 in 2015.
  • Analysts view Twitter with 6 Buy, 24 Hold, and 10 Sell ratings. (source: MarketBeat.com)
  • Insiders bought 1,266,662 shares in the last three months but sold a net 2,063,469 shares in the past year. (source: NASDAQ.com)
  • Twitter shares have a 1-day price change on earnings of 10.80%. Options are pricing in an implied move of 10.05%.

Recent News

  • 01/19: Lower ambitions? Twitter’s selling its software toolkit Fabric to Alphabet (GOOGL) for an undisclosed sum. That makes initiatives like live TV even more important for Twitter, according to a post on Barron’s.com.
  • 01/12: MoffettNathanson offered five reasons why Twitter will be a Sell in 2017; Loss of talent; streaming sports platform destined to fail; president-elect Donald Trump hasn’t helped it revive user growth; “checks” suggest revenue may have declined in the U.S. in Q4; and valuation, according to a post on Barron’s.com.
  • 12/28: In 2017, Twitter faces some big challenges: 1. Can Twitter find a buyer? 2. Will CEO Jack Dorsey stop trying to run two companies at once? 3. Is there a better way to monetize the feed?, according to a post on Barron’s.com.
  • 12/21: Twitter CTO, Adam Messinger, is leaving the company after five years. Q4 saw COO Adam Bain and Product VP Josh McFarland leave. The company cut 9% of staff in October, 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 before firming up more recently. Point and figure technicians still have a bearish price objective of $8. (Chart courtesy of StockCharts.com)

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Summary

Analysts debate the continued departures of personnel as either part of savvy restructuring or a brain drain red flag. Twitter has seen analyst bullishness lessen over the past year, so it’s interesting to see the recent spurt of insider buying after selling eased up the previous quarter. Private equity could show interest this year. Moving into NFL streaming has some analysts disappointed that the focus has moved away from “fixing” their product. The company has beaten earnings estimates by an average of 4c the last four quarters. Estimize consensus for Non-GAAP EPS of $0.14 on revenue of $742.71 mln compares to analyst consensus of $0.12 on revenue of $740.13 mln. Revenue guidance (if available) and user data will also factor into the market reaction.

 

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