Twitter’s (TWTR) earnings release for the third quarter is slated for October 26, after the markets close. Over the past year, shares of the social network company have surged 27%, and are currently trading at over $62. A strong set of numbers could be the catalyst for a big move upward, so let’s take a closer look at what analysts on the Street are expecting.
Earnings Preview
Twitter EPS is expected to be $0.15 on revenues of $1.29 billion in the third quarter, while the company guided for revenues in the range of $1.22 billion to $1.3 billion.
Meanwhile, the Earnings Whisper number, or the Street’s unofficial view on earnings, stands at $0.21 per share.
Prior Period Results
In the previous quarter, the company reported adjusted earnings of $0.20, compared with the loss of $1.58 per share in the prior-year quarter. Additionally, the result beat the consensus estimate of $0.07 per share. At the same time, net revenue grew 74% to $1.19 billion and surpassed analysts’ expectations of $1.06 billion. (See Twitter stock charts on TipRanks)
Markedly, Twitter’s earnings history depicts mixed performance over the past four quarters, with upbeat revenue in all, but earnings miss in two of the four quarters, compared to consensus estimates.
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Factors to Watch For
The growing usage of Twitter, where people indulge in real conversations with others who share their interests, amid forced lockdowns and stay-at-home restrictions due to the pandemic, led to an increase in global conversation surrounding current events. Consequently, the company’s average monetizable DAU (mDAU) reached 206 million in the second quarter, up 11% year-over-year, driven by ongoing product improvements. That increase in mDAUs is likely to have led to market share gains in the to-be-reported quarter, given the company’s efforts to add more features and handle abuse issues.
Furthermore, the coronavirus induced a major ongoing shift towards online commerce. That shift has driven gains for the ad business, which is likely to have continued in the third quarter of 2021. Twitter’s ad revenues are expected to have remained strong in the third quarter, driven by higher demand for Twitter’s solutions, as more events and product launches resumed. Therefore, Twitter’s top-line might have been pushed higher with growing usage of the platform and ad revenues.
Twitter’s initiatives in providing expanded offerings for Mobile Application Promotion (MAP) advertisers and small-and-medium businesses, in the current era of increasing demand for e-commerce services, might have induced growth for the company in the third quarter. With the increasing interest in e-commerce services, that type of platform is in demand.
Additionally, in the June quarter, Twitter introduced innovative features including Tip Jar, Ticketed Spaces, and Super Follows. Those features enable users to directly support content creators through tipping, and allow people to pay for access to exclusive live audio experiences.
Ticketed Spaces and other exclusive content are available via monthly subscription through Super Follows, the company said. Twitter users have started gaining first access to Super Follows and Ticketed Spaces in the September quarter, and that might prove to be a large plus to Twitter’s top line.
Also, the introduction of this tipping feature might have led to a rise in the number of content creators in the to-be-reported quarter.
Another interesting development was the introduction of Twitter Blue, the first-ever consumer subscription offering by Twitter, in Canada and Australia in the last quarter. That might have gained revenue in the third quarter.
In the to-be-reported quarter, with the aim of creating a more intimate space for conversation, Twitter revealed that it is testing a new feature called Communities. This feature allows groups of Twitter users to interact directly with members of that group, instead of with all of their followers.
While the panoply of new features could be a boon to Twitter’s revenues, a rise in expenses is expected to continue. Among Twitter’s bourgeoning expenses are investments in technology and products.
Analyst Recommendations
Prior to the third-quarter Twitter earnings report, Bank of America Securities analyst Justin Post maintained a Buy rating on the stock but lowered the price target to $82 (31.75% upside potential) from $90.
In a research note to investors, Post said that the company’s high exposure to brand ad spending reflects relative strength versus peers. Notably, for the fourth quarter, the analyst estimates revenue to grow 23% year-over-year to $1.59 billion and forecast revenues to be in the range of $1.50 billion to $1.58 billion.
The rest of the Street is bearish on the stock, with a Moderate Sell consensus rating. That’s based on 1 Buy, 2 Holds, and 3 Sells. The average Twitter price target of $63.17 implies 1.5% upside potential to current levels.
Website Traffic
TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Twitter’s performance this quarter.
According to the tool, the Twitter website recorded a 2.59% monthly decline, year-over-year, in global visits in September. In contrast, Q3 depicted quarter-to-date growth in 2021 of 1.54% more than quarter-to-date growth a year prior.
Notably, year-to-date website growth, compared to year-to-date website growth in the previous year, came in at 0.59%.
Risk Analysis
Investors should always be aware of the risks involved in any stock they are researching.
According to the new TipRanks’ Risk Factors tool, Twitter is at risk mainly from three factors: Finance and Corporate, Tech & Innovation, and Ability to Sell, which contribute 31%, 28%, and 16%, respectively, to the total 32 risks identified for the stock. Within the Finance and Corporate risk category, TWTR has 10 risks, details of which can be found on the TipRanks website.
Disclosure: At the time of publication, Priti Ramgarhia did not have a position in any of the securities mentioned in this article.
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