Twitter Q1 Beats On Earnings, Issues Vague April Outlook

Twitter Q1 Beats On Earnings, Issues Vague April Outlook
May 1, 2020

 

The social media platform Twitter Inc (NYSE: TWTR) reported fiscal 2020 first-quarter earnings that beat analysts’ estimates, despite the negative impact to its advertisement business due to the Covid-19 outbreak. Furthermore, considering the uncertainty in the business environment caused by coronavirus infections across the globe, Twitter withdrew its full-year outlook, while restraining from issuing a Q2 view. Following the news, the stock lost 7.75% or $2.41 to close at $28.68.

The San Francisco, California-based company, reported first-quarter 2020 revenues of $807.637 million, an increase from $786.890 million in the corresponding quarter last year.

For the quarter ended March 31st, 2020, the company posted a net loss of $8.396 million, or $0.01 per share, compared with a net profit of $190.804 million, or $0.25 a share in the similar period last year.

Excluding charges, non-GAAP net income for the recent quarter declined to $87,408 million, or $0.11 per share, from $288.485 million, or $0.37 a share, in the year-ago period.

Analysts polled by Refinitiv had anticipated Twitter to post earnings of $0.10 per share on revenues of $776 million.

Average monetizable daily active users (mDAUs) increased to 166 million in the first quarter, from 134 million in the year-ago period and above 152 million in the earlier quarter. Analysts surveyed by StreetAccount had forecast 164 million mDAUs.

Notably, mDAU growth of 24% on a y-o-y basis is the strongest ever recorded. Regarding mDAU, Twitter, at the end of March, said: “The absolute number of mDAUs stabilized … as many people around the world settled into new routines.”

Total advertising revenue was $682 million, an increase of $3 million from last year. To minimize the impact of the pandemic, Twitter is redirecting resources to develop revenue-generating products such as a Mobile App Promotion (MAP) tool. The company is also slowing down hiring while continuing to pour money in improving trust, increasing safety, and developing new products.

The company’s CFO Ned Segal opined that advertising spending started declining by the end of March and continues in April.  Furthermore, the decline in ad spending was severe in the US compared with Asia. Segal pointed out that the business was affected by revoked and postponed activities.

Segal disclosed that Twitter gained from ‘virtual experiences’ during the coronavirus outbreak. He said, “Live events are a really big way that people use the service, but that’s not just about something that’s scheduled. It could be something like [ESPN documentary] ‘The Last Dance’ where you essentially have watch parties on the service.”

The company clarified that it had minimum exposure to advertisements from the tourism sector as many of its clients are focused on new product rollouts and movie releases.

At the end of March, Twitter withdrew its outlook for the current quarter due to uncertainty caused by the coronavirus outbreak. At that time, the company stated that it anticipates second-quarter revenue to be slightly down on a y-o-y basis. While publishing the quarterly earnings, Segal noted that there are indications of revenue growth in the second quarter because the decline at the end of March was “relatively steady” despite a “wide range of outcomes” over the period March 11th-31st.

The company has suspended its FY 2020 outlook and indicated that there would be delays in establishing a new data center, implying a decline in capital expenditure in FY 2020. Twitter still anticipates a 25% increase in stock-based compensation on a sequential basis in the second quarter of 2020.

Before the Covid-19 outbreak, activist investment firm Elliott Management demanded the resignation of CEO Jack Dorsey, but arrived at a deal by the end of March. According to one of the clauses in the agreement, $1 billion was invested by Silver Lake.

Twitter, similar to other social media platforms, will possibly be affected by a decrease in ad revenue as several brands hesitate to advertise during the period of uncertainty.

The quarterly earnings beat and the gloomy business scenario are expected to keep the stock range-bound with bearish bias in the short-term.

The historical price chart indicates that the stock of Twitter is appreciating after testing the support at 22. The next resistance is anticipated near 38. Additionally, the stochastic oscillator is also rising. Therefore, we are expecting the stock to move up in the days ahead.

twtr - technical analysis - 1st May 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins


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